By Carol L. O’Riordan
We believe that the various government contract programs that give a degree of preference to disadvantaged groups are a good idea, and we work hard to put our clients in a position to benefit from them, but we also recognize that they can be abused.
Two years ago, we wrote in these pages: “While we support the various programs for granting preferences in federal contracting to companies in traditionally disadvantaged groups such as women, minorities, and disabled veterans, it is also critical that potential contractors not abuse the preferences that Congress has granted. Although this type of abuse is not nearly as common as some in the media seem to believe, it does occur. When it occurs, it gives a bad name to the thousands of legitimate contractors out there that are simply trying to survive and prosper by getting government work.”
At the time, we were discussing a case in Washington, D.C., in which a company allegedly misrepresented its status as operating in a HUBZone (Historically Underutilized Business Zone) and was stripped of that designation by federal action.
We recently learned of a similar case that was settled this month, and our views have not changed.
In this new case, a company accused of gaming the system agreed to settle by paying $7.8 million to the U.S. government under the False Claims Act. The allegation was that LB&B Associates, Inc., a North Carolina-based facility management and maintenance government contractor, made false statements to the U.S. Small Business Administration (SBA) in order to obtain and retain Section 8(a) certification as a minority and woman-owned business.
The false statements essentially involved LB&B’s assertion that Lily Brandon, an Asian Pacific American woman, controlled the company’s operations, while in fact it was her husband, F. Edward Brandon — who was not qualified to receive any preferences under SBA programs — who ran the company. LB&B was also accused of improperly participating in the SBA’s Mentor-Protégé program by setting up a joint venture with “protégé” entities while doing the contract work itself. The complaint against LB&B was filed by two of the company’s former project managers who acted as whistleblowers. They will share in the recovery of money from LB&B.
A case like this, unfortunately, helps perpetuate a myth that the entire Section 8(a) and similar economic development programs are riddled with fraud and corruption. This is simply not true. But when a high-profile case of this type comes along, it hurts the cause of the vast numbers of companies and people who legitimately take advantage of these government programs.
We are glad when a bad apple is sniffed out, but that doesn’t mean that the entire barrel is rotten.