Whistleblower awarded $631,000 for exposing small business subcontracting fraud

A whistleblower will pocket nearly $631,000 for exposing a small business subcontracting fraud that cheated service-disabled veterans, the Department of Justice said May 12, 2022.

Whistleblowers are key to stopping schemes that take advantage of opportunities set aside for deserving veterans, said Scott Williams, president of Ethic Alliance.

“The government relies on the integrity and conviction of the populace to help police large programs and markets, just like this example of company cheating disabled veterans,” said Williams.

Ethic Alliance is a for-profit corporation and law firm whose purpose is to empower, educate and protect whistleblowers, ensuring they receive the protection they need and the rewards they are entitled to under US law (the US government will typically reward whistleblowers 10%-30% of the amount recovered or sanctioned under various whistleblower laws).  Ethic Alliance protects whistleblowers through a secure, encrypted reporting and messaging platform, attaching the strong legal protection of attorney-client privilege from the moment a report is filed with us, and access to a network of specialty attorneys that have made careers protecting and supporting whistleblowers, and working with the US government to win whistleblower lawsuits.

In the latest case, in April 2022 a whistleblower filed a “qui tam” complaint in federal court in New York raising allegations that Hensel Phelps Construction Co. (Hensel Phelps), a large construction company headquartered in Greeley, Colorado, improperly manipulated a federal subcontract designated for a business owned and operated by a service-disabled veteran, the Justice Department said. 

When a whistleblower, or “relator,” files a qui tam complaint, the False Claims Act requires the United States to investigate the allegations and elect whether to intervene and take over the action or to decline to intervene and allow the relator to go forward with the litigation on behalf of the United States.  The relator is generally able to then share in any recovery. 

Hensel Phelps has agreed to pay $2.8 million to resolve the allegations. Pursuant to the settlement deal, the whistleblower – identified as Fox Unlimited Enterprises LLP -- will receive $630,925 of the amount.

According to the feds, in 2011 Hensel Phelps -- a general contractor and construction company that performs large scale private construction and public works projects nationwide -- won a contract to construct the Armed Forces Retirement Home’s New Commons/Health Care Building in Washington, D.C.  The Armed Forces Retirement Home provides retirement communities and residential facilities for veterans. 

As a condition of the contract, the feds said, Hensel Phelps was required to have and implement a small business subcontracting plan to provide contracting opportunities for service-disabled, veteran-owned small businesses and other types of small businesses.

During the course of the contract, Hensel Phelps negotiated with another large business, identified in the settlement agreement only as “Company 1,” to provide kitchen and food service equipment for the Armed Forces Retirement Home. “Company 1” was not a service-disabled, veteran-owned small business, the feds alleged.

Hensel Phelps instead entered into a subcontract with a service-disabled, veteran-owned small business, but it was merely a passthrough for Company 1, which was providing all of the work, including the bonding, purchasing, and installing of all of the equipment. The service-disabled, veteran-owned small business’s role was limited to providing its status as a service-disabled, veteran-owned small business, and making it appear as though a service-disabled, veteran-owned small business was performing the work, the feds alleged.

“This settlement holds accountable another large company for scheming to obtain a contract set aside for a veteran-owned small business,” said United States Attorney Freedman, in a statement.

Contact Ethic Alliance at info@ethicalliance.com

Related link: https://www.justice.gov/usao-ndny/pr/construction-company-agrees-pay-28-million-resolve-allegations-small-business

Photo by sydney Rae on Unsplash