Veterans Disability Info Blog

Whistleblower Exposes Fraudulent Defense Contracts, ADS Reaches Settlement and Will Pay $16 Million

ADS Inc. will pay $16 million to settle False Claims allegations that it fraudulently obtained government contracts through a scheme that included using undeclared affiliates to bid for contracts set aside for small businesses.

The recovery represents one of the largest settlements ever reached in a case of small-business contract fraud.

ADS, originally a diving supplies store, provides a variety of equipment and logistics solutions for the U.S. military, from protective gear to combat supplies and robotic devices.

The Department of Justice believes ADS conspired with several affiliates to secure contracts for which it was not eligible. The contracts in question, with the Department of Defense and Homeland Security, were set aside for small businesses, women- and minority-owned companies. ADS allegedly incurred bid-rigging to secure them. 

In other words, ADS created a network with several affiliates, concealing its links to them, and misrepresenting them in order to gain access to contracts reserved for small and disadvantaged businesses.

Bureaucracy and lack of resources often make it difficult for law enforcement to spot this kind of elaborate scheme. Without the invaluable assistance of whistleblowers, most fraudulent government contracts would never be exposed.

In the case of ADS, the whistleblower responsible for prompting the investigation has chosen to remain anonymous. The whistleblower award in this case will be about $2.9 million, the DOJ has announced. Industry insiders who chose to file a lawsuit under the False Claims Act are entitled to sizable rewards.

According to DC U.S. Attorney Channing D. Phillips, “This settlement reflects the government’s commitment to ensure that its business partners are truthful in their dealings with the United States… Contractors who attempt to disguise or misrepresent themselves to obtain funds reserved to promote small and disadvantaged businesses will be held accountable for their fraud on the public fisc.”

The network of companies involved in the alleged fraud include Mythics Inc., London Bridge Trading Co. Ltd., MJL Enterprises LLC, SEK Solutions LLC, and Karda Systems LLC. Some of these companies were misrepresented as being small businesses, veteran-owned, and as fulfilling other key eligibility requirements to obtain advantageous government contracts.

ADS spokespeople have commented that the company has cooperated with investigators, and that their decision to settle has come after spending millions of dollars in legal fees. Considering ADS made a billion dollars from government contracts in 2016, a $16 million settlement, which could break a truly small business, seems like a relatively low price to pay to end the DOJ’s probe.

“This case involved fraud perpetrated in the Service-Disabled Veteran-Owned Small Business Contracting Program and the 8(a) Program for disadvantaged individuals. Identifying and aggressively pursuing instances of civil fraud by participants in these procurement programs and other set aside contracting programs, is one of SBA’s top priorities,” SBA General Counsel Christopher M. Pilkerton has commented.

We represent veterans who blow the whistle on schemes such as the ADS service disabled veteran owned small business contracting program scam. Whistleblowers who report fraud, following a precise procedure (do it wrong and no reward) may be eligible for substantial cash rewards as in this case. If you have private information on companies cheating the SDVOSB program, Connect with Us at 888.878.9350 for a confidential evaluation as to whether you can qualify for a whistleblower award.

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