En Pointe: Hidden Affiliates and Underreported GSA Sales Across Successor Names

En Pointe agreed to pay slightly more than $5.8 million to resolve allegations of hidden affiliates and underreported GSA sales, with successor names including Modern Gov IT, Dinco and Collab9. The government alleged that the business claimed access to contracts reserved for small companies and separately understated sales that determined fees owed to GSA. If you knew the companies under different names, or worked with the sales behind the quarterly reports, those connections are the heart of this case.

Which En Pointe Company Became Which?

The Justice Department’s July 6, 2016 announcement identifies three changed company names. Someone with an older contract or a later corporate record may recognize different names for the same business:

The companies were based in Gardena, California.

En Pointe Gov. was the company whose small-business status the government challenged. It was also the company the defendants allegedly caused to submit false quarterly sales reports.

What Is Small Business Fraud?

The government alleged that En Pointe’s small business fraud involved hidden affiliates that made En Pointe Gov. ineligible for small-business set-aside contracts it obtained from 2011 through 2014.

A small-business reservation decides which businesses get to compete for the work. The alleged false certification let En Pointe Gov. compete for contracts its affiliates made it too large to qualify for. The advantage began before the first invoice.

Affiliation reaches ownership, management ties, contracts and economic dependence. For an insider, the useful question is who could make the decisions that the government-facing company appeared to make for itself.

That is why we read the eligibility representation beside the ownership and management records. We want to know whether the business described to the government matches the one making the decisions.

What Is GSA Fraud?

The GSA fraud alleged here involved false quarterly sales reports that reduced fees owed to the General Services Administration. The government alleged that the defendants caused En Pointe Gov. to underreport sales from 2008 through 2015 under a GSA Schedule contract that let other federal agencies buy from En Pointe.

The contract required En Pointe to return a percentage of its sales receipts to GSA. According to the government’s account, reporting fewer sales meant paying less of that fee. The fee allegation followed the sales and the money due back to GSA, separately from the small-business eligibility allegation.

GSA’s Industrial Funding Fee is included in the sale price paid by the ordering agency. The contractor remits it to GSA to support the Schedule program. The seller handles the remittance even though the customer bears the fee in the purchase price.

We see the problem plainly: an understated report can leave the seller holding money that belongs to the purchasing program. The alleged advantage comes from keeping part of the sales receipts that the contract required the seller to return.

Under the traditional Schedule clause, contractors could consistently recognize sales at order, delivery, invoice or payment. Comparing the sales ledger with the quarterly report therefore means understanding which event the contractor used to recognize the sale.

What Proof Do You Need as a Whistleblower?

For allegations like these, the useful proof connects the eligibility representation to the business’s control and the quarterly sales report to the sales and fees behind it. We examine those connections with you through the contract and transaction records, following each allegation’s own period.

A contract employee may recognize the representation, while someone in finance recognizes the sales omitted from a reporting total. Someone who worked through a name change can connect files that otherwise look unrelated.

The separate periods matter. The sales-reporting allegation began before the eligibility period and continued after it. Looking only at the set-aside years would leave part of the alleged fee conduct outside the comparison.

Can a Contractor Be a Whistleblower?

Yes. The En Pointe case began with a qui tam lawsuit brought by Minburn Technology Group, a Virginia seller of information technology products and services, and its managing member. A company in the trade brought the allegations to the government. The United States then joined and took over the case.

The Justice Department announced that the whistleblowers would collectively receive approximately $1.4 million from the settlement.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

The case shows that knowledge from another business in the trade matters.

Successor Names Can Divide One Procurement Story

Axway‘s GSA case followed pricing duties through Valicert and Tumbleweed. The Justice Department’s account describes mergers and approved transfers of the contract. The allegations concerned incomplete pricing disclosures by the predecessors and failures to honor price-reduction duties by Tumbleweed and Axway. A reader who remembered only the latest company name could miss the earlier pricing records.

In a separate R&K Enterprises settlement, the government alleged that R&K transferred a contract to K&P Management and then left that affiliate’s revenue out of a GSA small-business bid. The alleged ties included shared executives, spousal ownership, economic dependence and control.

The Contract an Eligible Small Business Lost

The harm from false small-business eligibility includes the opportunity taken from a business that qualified for it. The En Pointe announcement expressly described ineligible large companies taking contracts away from legitimate small businesses.

The 2005 Contract Management article Small Business Act Certification Fraud: Raising the Stakes put the loss to eligible bidders plainly:

We see the unfairness in the government’s allegation: a business too large to qualify claimed work reserved for small companies. The eligible bidder loses the work. The honest larger business stays outside the reserved competition. The alleged false certification gives its user an advantage over both.

In En Pointe, the government also alleged that the sales report understated the fee due back to GSA. Access to the work on one side, money retained from the sales on the other. Both depend on what the contractor tells the government. Someone who knows the business behind that account can show both.

You Know the Business Behind the Name

If you know who controlled the bidder or which sales disappeared from the GSA reports, speak to one of our Whistleblower Experts about what you saw. We connect your knowledge of the business to its certifications and payments, bring in government procurement fraud whistleblower lawyers who understand affiliation and Schedule fees, and stay beside you throughout the case. We use those old company names and familiar accounting records to build your strongest government procurement fraud whistleblower case.