Fraudsters Charged with Cheating Service Disabled Veteran’s Out of $11M in Set-Aside Small Business Contracts

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Fraudsters Charged with Cheating Service Disabled Veteran’s Out of $11M in Set-Aside Small Business Contracts

Under the Veterans Benefits Act of 2003, service-disabled veterans who own small businesses get preference for government set-aside contracts.

This service-disabled veteran-owned small business (SDVOSB) program helps veterans compete among other small businesses in the community as a reward for their valuable service to our country.

Unfortunately, corrupt companies and individuals continually try to steal small business contracts meant for veterans by lying about veteran ownership and involvement, company size or company earnings.

To facilitate detection of illegal activities and recovery of stolen dollars, the government pays large cash awards to individuals with knowledge of SDVOSB fraud.

Otero and Ramsey Charged with Lying About Veteran Ownership, Control and Profits

On April 7, a San Diego federal grand jury named 54-year-old Andrew Otero of El Cajon, California and 57-year-old, service-disabled veteran Roger Ramsey of Spring Valley, California and their companies, A&D General Contracting, Inc. and Action Telecom, Inc. in a 14-count indictment for allegedly defrauding the federal government out of $11 million in contracts set aside for service-disabled veteran-owned businesses.

Businesses must meet certain criteria to be eligible for service-disabled veteran-owned small business set-aside contract awards.

Eligibility criteria for SDVOSB contracts include:

  • Business must be “small” (< $5,000,000 annual revenue, < 500 employees)
  • Veteran with validated service-connected disability must own at least 51% of the business
  • Ownership must be direct
  • Service-disabled veteran must hold the highest position in the business
  • Service-disabled veteran (or spouse) must manage the business operations and control decision making

Roger Ramsey was indeed a service-disabled veteran, but Otero was not. In order for Otero to be eligible for SDVOSB funds, the court alleges that Otero and Ramsey combined their two businesses to create a joint venture called Action-A&D.

In their applications for the SDVOSB set-aside contracts, Ramsey said his company Action would manage the joint venture, hire project managers for each set-aside contract, and collect over 51% of the joint venture’s profits.

Based on these statements, Otero and Ramsey obtained $11 million in federal construction contracts and task orders with the Army Corps of Engineers (ACE) and Department of Veteran Affairs (VA).

Yet Otero and Ramsey allegedly made a secret side agreement that Otero’s company A&D – not Ramsey’s company Action – would manage the construction jobs. Under the secret agreement, A&D would also collect 98% of the joint venture’s profits – not Action. Surprisingly, the side agreement also stated that Otero and Ramsey created the joint venture so that A&D could “use the Disabled Veteran Status of Action” to bid on contracts – a blatant admission of ineligibility under the SDVOSB program.

Though the SDVOSB contracts listed Ramsey as president of Action and the joint venture Action-A&D, Ramsey actually worked for another company full time.

Otero controlled the daily operations, hiring, management and long-term decision-making of the joint venture. Otero allegedly paid Ramsey a small fee for letting him use Ramsey’s disabled veteran status to obtain the SDVOSB contracts.

“One important way in which our country tries to repay the debt of gratitude we owe to our veterans is by setting aside some government contracts for those who have been disabled during their service,” said acting United States Attorney Alana Robinson. “But unscrupulous contractors have abused this program through ‘rent-a-vet’ schemes, such as the one described in today’s indictment. The Department of Justice will work to ensure that criminals who abuse important contracting programs such as the SDVOSB are held to account.”

Indictment Charges Defendants with Conspiracy, Wire Fraud, False Claims Act Violations

The April indictment charged Otero, Ramsey, A&D and Action with one count of conspiracy, three counts of wire fraud and one or more counts of fraud and false statements against a government-funded program.

Forfeiture allegations may require the defendants to forfeit any property derived from the proceeds of their scheme.

All four defendants face civil charges alleging violations of the federal False Claims Act. When businesses obtain SDVOSB contracts in violation of government requirements, every bill that business submits to the government for payment is a false claim.

Penalties for violating the False Claims Act continue to increase as the government suffers more and more financial loss.

  • Penalties for false claims made before August 1, 2016 are $5,500 - $11,000 per false claim.
  • Penalties for false claims made between August 1, 2016 and February 3, 2017 are $10,781 - $21,563 per false claim.
  • Penalties for false claims made on or after February 3, 2017 are $10,957 - $21,916, per false claim.

Fortunately, with each increase in penalties comes an increase in potential SDVOSB fraud whistleblower cash award amounts.

Government Pays Large Cash Awards for Information on SDVOSB Fraud

SDVOSB whistleblowers are America’s number one weapon against service-disabled veteran-owned small business fraud. Because whistleblowers who report False Claims Act violations are entitled to collect between 10% and 30% of the total government recovery amount resulting from the information they supply, and cases of fraud often involve hundreds – even thousands – of false claims, whistleblower cash awards can easily reach the millions of dollars range.

Our SDVOSB whistleblower lawyers help maximize cash awards for active military, veterans and other clients who chose to come forward and help fight SDVOBS fraud.

If you have knowledge of fraud against the SDVOSB program, we can help you protect your rights as a whistleblower and maximize your whistleblower cash award. Contact us to learn whether your information qualifies you for a cash whistleblower award in a free, fully confidential consultation. Call 888-878-9350 or E-mail [hidden email]

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Eric Gang

Eric A. Gang, Esq. is a veterans’ disability attorney who represents disabled veterans nationwide in their appeals for VA disability benefits. He has litigated over 500 appeals at the U.S. Court of Appeals for Veterans Claims and has recovered millions of dollars in retroactive benefits for disabled veterans. His work has been mentioned in media outlets across the country. He publishes and lectures widely in the area of veterans benefits. You can reach him at (888) 878-9350 or www.veteransdisabilityinfo.com.



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