Level 3 Communications: Who Was Behind the Woman-Owned Subcontract?

Level 3 Communications agreed to pay $12,772,843 to settle allegations involving DHS Terrawatt subcontracting and purported woman-owned status, along with separate WITS 3 kickback and bid-information allegations. The government alleged that Level 3 presented P.V.S. Inc. to the Department of Homeland Security as a woman-owned small business while another company, MSO Tech, performed its work. For someone inside the subcontracting chain, the question is concrete: did the business described to the government match the business you saw doing the job?

Level 3 was a multinational telecommunications and Internet service provider. The Justice Department’s June 25, 2021 announcement covered both the Department of Homeland Security contract and a separate contract used by the Department of Defense Office of Inspector General. A former Level 3 employee brought the whistleblower lawsuit behind the settlement.

DHS Terrawatt and PVS’s Purported Woman-Owned Status

Under Terrawatt, Level 3 had a contractual obligation to award a portion of the work to a woman-owned small business. The government’s woman-owned small-business fraud allegation concerned how the company claimed to satisfy that obligation.

The United States alleged that in 2011 Level 3 told the Department of Homeland Security that PVS qualified. According to the announcement, a Level 3 senior manager and another individual knew that PVS was owned and controlled by MSO Tech’s owner. The work awarded to PVS was allegedly performed by MSO Tech instead.

The alleged knowledge inside Level 3 matters as much as the company name on the paperwork.

We see the absurdity in that arrangement: the participation requirement can appear satisfied while the promised participant supplies only the name. A subcontract is supposed to put work into the qualifying business, not make that business disappear from the work. That is what makes the government’s account recognizable to someone who dealt with the operating company every day.

Why Ownership and the Operating Business Belong Together

Small-business contracting turns on more than a company’s description of itself. Ownership, control, the relevant program and the work actually performed all matter. A procurement employee may see a representation in the solicitation or SAM records, while an operations employee sees who makes the decisions and supplies the people.

The 2005 Contract Management article Small Business Act Certification Fraud: Raising the Stakes treated miscertification as a wider problem than misstating a company’s size. Its definition included affiliation, subcontracting arrangements, ownership and management issues, and improper claims of women-owned and controlled status. That is a useful way to read the Terrawatt allegation: the representation had to be tested against the company behind it.

The article put the harm to eligible businesses plainly:

Small Business Act Certification Fraud: Raising the Stakes, Contract Management, 2005

That alleged arrangement costs eligible businesses work and taxpayers the small-business participation their contract required.

The Separate WITS 3 Kickback Allegations

The WITS 3 allegations concerned payments for favorable subcontract treatment and access to a competitor’s protected bid information. Level 3 held the General Services Administration contract under which the Department of Defense Office of Inspector General ordered supplies and services. It subcontracted work to MSO Tech and PVS, both Florida-based companies with the same owner.

The United States alleged that in 2012 their owner paid kickbacks to Level 3 senior managers to steer subcontract work to the companies. In return, MSO Tech and PVS allegedly received favorable treatment and subcontracts. This was the government contractor kickback allegation in the combined resolution.

The government also alleged that a senior manager knowingly obtained protected competitor bid information to gain an advantage when bidding on WITS 3 task orders. The subcontract-selection allegation concerned who received the work. The bid-information allegation concerned an advantage in winning it. Both belonged to WITS 3. The purported woman-owned participation belonged to the Department of Homeland Security’s Terrawatt contract.

What Proof Do You Need as a Whistleblower?

For a subcontracting case like this, the useful proof connects what the government was told with who controlled the business, performed the work and received the payments. Bids, emails, payroll and subcontract payment records can show different parts of that connection.

We work through email authorship, payroll and payments with you to connect the claimed participant to the people directing and performing the work.

A person who handled the subcontract, worked with the crews or prepared the bid may recognize that relationship before anyone outside the business does.

In TriMark’s settlement agreement, Gill Marketing admitted writing emails for a small business to send to government customers as its own, a concrete example of why email authorship matters when testing a subcontractor’s claimed role.

Paragon’s Alleged DHS Fronts

The same gap between the qualifying name and the actual operator appeared in a larger civil resolution: Paragon Systems agreed to pay $52 million in a separate Department of Homeland Security case announced on November 12, 2024. The government alleged that former executives controlled purported woman-owned and service-disabled veteran-owned businesses that won security contracts and subcontracted substantially all the work to Paragon. Female relatives and friends allegedly served as figurehead owners.

That case also alleged more than $11 million in concealed consulting payments. For an insider, the connection to Terrawatt is the claimed qualifying business placed between the government and the actual operator.

The Level 3 Settlement and the Former Employee’s Case

The Level 3 settlement resolved federal civil claims under the False Claims Act, the Anti-Kickback Act and the Procurement Integrity Act.

The former employee brought the case under the whistleblower provision of the False Claims Act. That employee connection matters to someone who knows how a subcontract was presented inside a company and how it operated outside the paperwork. The Terrawatt allegation reached the people who allegedly knew the ownership and performance story was wrong when the Department of Homeland Security was told otherwise.

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

You Saw Who Was Doing the Work

If you handled the ownership records, subcontract decisions or payments behind a claimed woman-owned business, speak to our Whistleblower Experts about who really ran the subcontract. We bring in government procurement whistleblower lawyers who understand small-business participation cases and stay with you from the first conversation through the case. Together, we turn what you know about the operating business into your strongest government procurement whistleblower case.