Have you heard of “Rent-A-Vet” schemes? Corrupt companies lie and say a disabled veteran is a majority owner and active manager of their small business to win service-disabled veteran-owned small business (“SDVOSB”) contracts. In doing so, they steal millions of federal contract dollars set aside specifically for hard-working service-disabled veterans.
It’s an inexcusable practice, but the government continues to crack down on these fraudsters. On June 28, a federal court sentenced San Diego contractor Andrew Otero to 18 months in custody and $400,000 in fines for criminal convictions of fraud against the U.S. and conspiracy to defraud the government.
Otero’s company, A&D General Contracting Inc., had to pay a $1.5 million in criminal fines and $334,561 in forfeiture. Andrew Otero and A&D also agreed to pay $3.2 million to settle civil charges under the False Claims Act (“FCA”).
Back in February 2015, the federal government filed False Claims Act suits against Action Telecom Inc., A&D General Contracting Inc., and Andrew Otero, followed by a criminal indictment in April 2017.
The government alleged that the construction companies obtained $11.8 million in VA and Army Corps of Engineers contracts by defrauding the SDVOSB set-aside program, a program that sets aside at least 3% of most federal contract funds solely for small businesses owned by service-disabled veterans.
Action Telecom was able to register as a SDVOSB because it gave employee Roger Ramsey – a service-disabled veteran – a controlling interest in the company back in 2009. In March of that same year, Action Telecom got together with neighboring company A&D General Contracting Inc. to form a joint venture. The companies claimed Ramsey would directly control all on-site employees under any SDVOSB contracts.
But under SDVOSB eligibility requirements, the veteran-owned company must receive a majority of the profits. In this case, the government alleged Action Telecom claimed it was receiving 51% of the profits when it was actually collecting only 2%. A&D General Contracting was receiving the other 98%.
Besides, in order to be eligible for service-disabled veteran-owned small business contracts, a service-disabled veteran must control management and daily business operations. But the complaint alleged that Ramsey did not exercise managerial or operational control over A&D employees or subcontractors who performed on the SDVOSB contracts. He was actually employed full-time at another company during the contract terms.
Charges in Otero Case:
- One count of conspiracy to defraud and commit offenses
- Three counts of major fraud against the U.S.
- Three counts wire fraud
- Two counts of false statements
In November 2018, a jury found Otero and A&D General Contracting guilty of conspiring to defraud the government by falsely claiming eligibility for government contracts set aside solely for service-disabled veteran-owned small businesses.
On Monday, October 7, following the $3.2 million False Claims Act settlement agreement, the government dropped its civil suit against Otero and A&D General Contracting Inc.
At sentencing, U.S. District Judge John A. Houston stated that the scheme took contracts away from veterans who “bore the weight of war,” and that the defendants’ crimes harmed disabled veterans by snatching contracts “right out of their hands.”
“The United States sets aside important contract work for service-disabled veterans as one small way to recognize their patriotism and repay the enormous debt we owe them for their service,” said U.S. Attorney Robert S. Brewer, Jr. “Our office will continue to protect these programs and hold those who abuse them fully accountable.”
Large Cash Awards for Information on SDVOSB Fraud
Want to help bump people like Otero out of the SDVOSB contract pool? Most of these cases inevitably involve the submission of false claims for payment to the federal government in violation of the False Claims Act.
And under the False Claims Act, anyone with information about SDVOSB fraud can earn a large cash award. In Otero’s case, a whistleblower would collect between $320,000 and $800,000 of the $3.2 million civil settlement – or more.
Our service-disabled men and women veterans deserve every opportunity available to them. If you have information about fraud against the SDVOSB program, we can help maximize your whistleblower cash award. Call [hotline] or E-mail firstname.lastname@example.org