This week, it was announced that the Virginia Beach, Virginia-based defense contractor ADS Inc. and its subsidiaries had agreed to pay the United States $16 million to settle allegations regarding violations of the False Claims Act. The company was accused of conspiring with and causing small businesses to submit false claims for payment in relation to fraudulently acquired small business contracts. The announcement was made by the Department of Justice on Thursday.

The settlement will resolve the aforementioned issues, as well as allegations that ADS had engaged in bid rigging for certain contracts, which it allegedly acquired fraudulently. To date, the settlement is one of the largest involving alleged fraud in connection with small business contracting eligibility. Chad A. Readler with the Justice Department’s Civil Division made a statement about the matter.

“Small or disadvantaged businesses serve as important engines of economic growth, and the United States utilizes small business set-aside contracts to aid those businesses in their development. When ineligible companies improperly obtain set-aside contracts, they prevent the small business community from receiving the assistance that Congress intended.”

To qualify as a small business under the law, companies must meet certain requirements. The size, ownership and operational control are all taken into consideration. The settlement resolves allegations that ADS in connection with small businesses that it controlled fraudulently convinced the government to award certain contracts, which were intended for small businesses.

The company was accused of misrepresenting eligibility requirements for their purported small businesses affiliates, which includes Mythics Inc., London Bridge Trading Co., MJL Enterprises, SEK Solutions, and Karda Systems.

MJL Enterprises falsely claimed to be a small company operated by a service-disabled veteran. SEK Solutions and Karda Systems had both falsely claimed to qualify as a socially or economically disadvantaged business with the Small Business Administration’s Business Development Program.

To obtain the contracts, ADS allegedly hide its affiliations with the aforementioned companies, while simultaneously misrepresenting the size and eligibility of the businesses. The settlement subsequently resolves allegations that ADS had been involved in illegal big ridding to distort prices associated with certain government contracts.

Finally, the settlement resolves a whistleblower lawsuit. Ameliorate Partners LLP will receive approximately $2.9 million for acting as a whistleblower in the case.

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