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In a settlement that DOJ has touted as “the largest-ever False Claims Act recovery based on allegations of small business contracting fraud,” food services equipment supplier TriMark USA agreed to pay $48.5 million to resolve allegations that its subsidiaries used front companies owned by service-disabled veteran-owned small businesses (SDVOSBs) to secure federal set-aside contracts.�� While TriMark made it appear that it was the SDVOSBs performing the contracts, in fact, the government alleged, TriMark performed substantially all of the work.�� The government investigation was prompted by a whistleblower complaint under the False Claims Act.�� The whistleblower will receive an award of $10.9 million.

The TriMark settlement has many of the standard hallmarks of contract set-aside fraud.�� Federal and state government purchasers set aside or offer preferences on contracts to small and disadvantaged businesses.�� For example, to help provide a level playing field for small businesses, the federal government limits competition for certain contracts to small businesses, or to small businesses that participate in specific Small Business Administration programs. Federal contracts with set-asides include construction contracts, defense contracts, GSA contracts, and others.

For some, the lure of set-aside contracts is too great.�� Companies in search of an avenue to secure government contracts seek to game the system by using a qualified bidder on a set-aside contract.�� While such teaming arrangements can be valid, they must meet specific criteria regarding affiliation and control.�� Similarly, if a large business is claiming credit for subcontracting to a small or disadvantaged business, the disadvantaged business must be independently responsible for performing a portion of the work with its own employees and equipment.�� Qualified small businesses cannot serve merely as pass-throughs.

The TriMark settlement agreement recites government allegations that a TriMark subsidiary wrote to an unidentified SDVOSB that they wanted that company to serve “as our TriMark partner focusing on capturing set aside business that we can’t participate in.”  The United States contends that TriMark and its affiliates exerted significant influence over each of the small businesses’ decision-making processes during the bid, award, and performance of the federal contracts at issue. The defendants allegedly dictated pricing and contract terms, ghostwrote emails to government officials, and dictated which contracts the small businesses should and should not bid on. The defendants knew that the contracts were secured through false certifications that the bidders met SDVOSB, VOSB, and/or small business criteria.

False statements about small or disadvantaged business status fraudulently induce the government to award contracts to entities that are not eligible to receive those contracts.�� Even if the work in question is actually performed for the government, the government is damaged by the underlying false representations, and the policy goals of the small business programs are undercut when companies exploit those programs by committing fraud.

Whistleblowers are critical to small business contract fraud, as they can bring information to the government that would otherwise not be available:  who was actually doing the work on the contract?  Who was reaping the benefits of the contract? Who actually owns and controls the small business?  Individuals with information about fraud in government contract set-aside and preference programs can blow the whistle by bringing a claim under the False Claims Act, and may be eligible to receive a financial award.

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Our roundup of 2021’s Top Ten Non-Healthcare False Claims Act (FCA) recoveries illustrates the statute’s continuing capacity to fight both conventional and emergent frauds straddling a variety of industries. In 2021 alone, the United States recovered hundreds of millions in taxpayer funds obtained through false claims tainted by textbook contracting fraud schemes (overbilling on government contracts, selling the government substandard products and services, and the like) as well as evolving FCA enforcement arenas like bribery and bid-rigging schemes, fraud in the energy sector, and fraud on humanitarian relief and development programs.

Though healthcare matters now encompass the majority of FCA dollars recovered, the list below demonstrates that fraud on the government sadly extends far beyond the healthcare space. The list set forth below reflects over a quarter billion dollars in recoveries from just ten of last year’s non-healthcare FCA recoveries. With this compilation, we celebrate the conscientious whistleblowers and government officials who have and will fight fraud in all its forms.

1. Balfour Beatty Communities (BBC) – $65 Million – This military housing provider agreed to pay over $65 million and plead guilty to fraud charges surrounding a scheme to obtain incentive payments on government contracts by falsely reporting certain performance objectives it had not in fact met.
2. Navistar – $50 Million – A military vehicle contractor settled these whistleblower-initiated FCA allegations over inducing the U.S. Marine Corps to enter a contract modification that overcharged for an armored vehicle suspension system known as Mine-Resistant Ambush Protection (MRAP). According to the government, it relied on fraudulent sales of invoices Navistar provided to justify its pricing during contract negotiations.
3. United Airlines – $49 Million – This settlement resolved criminal and civil claims that United’s cargo division overcharged the U.S. Postal Service on contracts to transport mail internationally. United allegedly submitted false data surrounding departure and arrival scans to track mail movement, in violation of its contracts with USPS.
4. Insitu – $25 Million – The former company executive who blew the whistle shared in this recovery over FCA violations concerning contracts to supply drones to the U.S. Navy and U.S. Special Operations Command. From 2009 to 2017, Insitu, owned by Boeing, allegedly used recycled parts in its drones but submitted to the government cost and pricing data for new parts.
5. Level3 – $22 Million – The settlement resolved a former employee’s claims that the multinational telecommunications and internet service provider accepted kickbacks from a subcontractor on its contracts with the General Services Administration. Level3 also allegedly violated its contract with the Department of Homeland Security when it falsely claimed the same subcontractor was a woman-owned small business.
6. COLAS Djibouti SARL – $14.5 Million – The French contractor faced civil and criminal charges over contracts to supply concrete to the U.S. Navy for airfields in the Republic of Djibouti. The company allegedly violated the contracts when it made false representations and reported fake testing results about the concrete’s composition and characteristics.
7. AAR and AAR Airlift Group – $11 Million – A former employee-turned whistleblower shared in the government’s recovery over claims the company violated its government contracts when it failed to maintain military helicopters in airworthy and mission capable condition.
8. Avis Budget – $10.1 Million – The car rental company and its subsidiaries settled allegations that it violated its government contracts when it charged government renters for add-on services (e.g., collision/loss waiver and supplemental liability coverage) that were already baked into the overall arrangements.
9. International Rescue Committee – $6.9 Million – This settlement over fraud and corruption in humanitarian relief programs resolved claims that the organization engaged in a kickback and bid-rigging scheme from 2012-2015 that inflated its charges on contracts with the USAID to provide humanitarian assistance to displaced persons in Syria.
10. Devon Energy – $6.15 Million – According to the government, the company and its affiliates underreported and underpaid the Department of the Interior for mandatory royalties on the value of gas it produced from public land, including improperly deducting certain costs.

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• Bribery and Bid-Rigging
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