The Government has nabbed another company for making false claims in order to get loans from the Program for Small and Disadvantaged Businesses. According to a Department of Justice press release, Okland Construction Co., Inc., of Utah, will pay the Government $928,000 to settle U.S. claims that the company only pretended to be working with a small business when it worked nine contracts, mostly for construction projects at Nevada’s Nellis Air Force Base.
To help small businesses, federal agencies are required to set aside a certain number of contracts, known as 8(a) contracts, that will be awarded to small businesses. In order to encourage small business development, the program also allows a larger corporation to act as a “mentor” for a smaller corporation. The mentor and the smaller corporation can form a joint venture and work together on the contract.
I represent whistleblowers who know about fraud against the Government, and lately I have seen several cases of small business contract fraud, where companies pretended to be working with small businesses to try to steal some of these 8(a) contracts. I have seen situations where big companies pretended to be small businesses. I even saw one very shocking situation where a large corporation claimed to be working with a smaller one – when in fact the smaller business not only was not working on the contract, it did not even know it supposedly had the contract!
Okland is a huge contractor, ranged no. 67 of the 2013 Top 400 Contractors by Engineering News-Record (ENR). According to the Department of Justice, in order to obtain a number of contracts, Okland agreed to mentor a West Valley City construction firm, Saiz Construction Co., Inc.
According to an ENR article about the lawsuit, Okland Construction to Pay U.S. $928K to Settle False-Claims Allegations, the protégée company and its owner, Abel Saiz, said the mentoring never happened. Saiz said that Okland was only pretending to work with his company. While Saiz and his employees were supposed to get to do at least 15% of the work, in fact, Okland claimed its own employees were Saiz employees in order to make it appear that it was working with Saiz. According to the settlement agreement, DOJ accused the larger construction company of essentially taking over the contract, to the point that it submitted invoices and handled all the payroll matters itself.
Saiz says that when he confronted Okland about what it was doing, Okland “threatened to pull any bonding on existing projects and informed him that if he had a problem, Okland would ‘bury [him] in court.'”
Saiz and his company filed suit as whistleblowers (also known as “relators”) under the False Claims Act. Under the Act, Saiz was entitled to between 15% and 25% of the money the Government recovered by his suit under the False Claims Act. (A whistleblower’s percentage can be as high as 30% if the Government chooses not to intervene and the whistleblower continues the case on his own.)
Saiz is receiving $148,480 from the government’s money.
Okland also will pay Saiz’s attorneys $86,000.
Okland vehemently denied the allegations.