On June 30, the Department of Justice announced that two affiliated companies, HX5 LLC and HX5 Sierra LLC, agreed to pay $7.7 million to resolve allegations that they violated the False Claims Act (FCA). The government alleges that the two companies knowingly submitted false claims to the Small Business Administration (SBA) which allowed them to become eligible for set-aside contracts for small businesses from government agencies that include the National Aeronautics and Space Administration (NASA), the U.S. Army, and the U.S. Air Force.
In describing the nature of the alleged fraud, Principal Deputy Assistant Attorney General Brian M. Boynton explained that “small business set-aside contracts assist small businesses, including socially disadvantaged companies, to compete in the American economy.” Boynton pointed out that “when companies misrepresent their eligibility for such contracts, they prevent others from receiving the business opportunities Congress intended.”
Amaleka McCall-Brathwaite, Special Agent in Charge of the SBA’s Office of Inspector General’s Eastern Region, emphasized their office’s interest in detecting this kind of alleged fraud: “Individuals that provided fraudulent information to gain access to SBA funds intended to support eligible small businesses will face justice.” McCall-Brathwaite added that “Today’s settlement sends a strong message that those responsible will be held accountable. I want to thank the U.S. Department of Justice and our law enforcement partners for their support and dedication to pursuit of justice in this case.”
The alleged FCA violations and resulting civil settlement stemmed from claims brought by Vantage Systems Inc. through the qui tam provision of the FCA. Qui tam claims enable private citizens to file lawsuits on behalf of the government if they know of an individual or company defrauding the government. Qui tam whistleblowers are eligible to receive between 15 and 30% of the government’s recovery. Vantage Systems Inc., who according to their website are a “NASA multi-disciplinary engineering services company” that works with the NASA prime contractor community, will receive $1.4 million in this case.
In recent weeks, the U.S. Supreme Court has issued two decisions in False Claims Act whistleblower cases. On June 16, the Supreme Court issued an 8-1 ruling in United States, ex rel. Polansky v. Executive Health Resources, Inc. The decision grants the DOJ the authority to dismiss qui tam whistleblower lawsuits in cases in which it chose not to intervene.
On June 1, the U.S. Supreme Court issued an unanimous decision in U.S. ex rel. Schutte v. SuperValu Inc. The decision, heralded as a major victory by whistleblower advocates, overturns U.S. Court of Appeals rulings which allowed fraudulent companies to escape liability under the False Claims Act if they could prove their fraudulent actions could be based on a “reasonable interpretation of the law” regardless of whether or not the company intended to commit fraud.
