by Ben Vernia | November 1st, 2010
On October 29, the Department of Justice announced that two companies and their presidents agreed to pay $200,000 to settle allegations that they defrauded the Department of Defense by false claims relating to SBA and Historically Underutilized Business Zone status. According to DOJ’s press release:
Platinum One Contracting, located in Capitol Heights, Md., its president, Anthony Wright, and Capitol Contractors, also located in Capitol Heights, and its president, Vernon J. Smith III, have agreed to pay the United States $200,000 to settle claims that they used false statements to obtain contracts from the Department of Defense, the Justice Department announced today. The contracts had been set aside for companies that qualified for the Small Business Administration’s (SBA) 8(a) business development program, as well as for businesses that qualified for the Historically Underutilized Business Zone (HUBZone) program.
Under the SBA’s 8(a) business development program, a business owned and controlled by socially and economically disadvantaged individuals can apply for certification from the SBA as an 8(a) business. A business certified as an 8(a) contractor can obtain certain preferences during the contracting process, and can bid on contracts that the agency has set aside for qualified 8(a) businesses. A business can remain in the 8(a) program for up to nine years.
Under the HUBZone program, companies that maintain their principal office in a designated HUBZone and employ 35 percent of their workforce from a HUBZone, among other requirements, can apply to the SBA for certification as a HUBZone small business company. A HUBZone company can then use this certification when bidding on government contracts. In certain cases, government agencies will restrict competition for a contract to HUBZone-certified companies.
The United States alleged that Platinum One and Anthony Wright falsely represented to the SBA, the Navy and the Army that Platinum was controlled by a socially and economically disadvantaged individual. The government’s investigation found that Platinum One was actually controlled by Vernon J. Smith III, who is not socially or economically disadvantaged. The government alleged that Smith used Platinum’s 8(a) status to continue Capitol Contractor’s business operations after Capitol’s own 8(a) status expired in 2002. As a result of these false representations, Platinum obtained contracts from the Navy and the Army.
The United States also alleged that Platinum One and Anthony Wright falsely represented to the SBA and other government agencies that Platinum maintained its principal office in a designated HUBZone location. In fact, Platinum actually operated out of offices owned by Capitol that were not located in a HUBZone. Platinum One did not qualify for the HUBZone program, yet because of its false statements to the SBA and the Air Force, it obtained contracts that had been set aside by the Air Force for qualified HUBZone companies.
