Service-Disabled Veteran-Owned Small Businesses Vulnerable To Fraud

Government Procurement Fraud


In a case riddled with collusion and bribery, a Virginia man was found to have exploited the government’s preferential treatment towards veteran-owned businesses in a brazen fraud scheme, resulting in the receipt of millions in wrongfully awarded contracts. Using his position as a sales representative for two separate Service-Disabled Veteran-Owned Small Businesses, or SDVOSBs, he purposefully created the illusion of competition in order to win government contracts that would have otherwise been turned down. These fraudulently obtained funds were totaled at over $33 million by the time the five-year scheme was uncovered, of which the employee in question took home $1,065,103.90.

This exclusivity in government bids is offered under a provision of the Veteran Benefits Act of 2003, which allows federal procurement and contracting officers to limit candidacy to SDVOSBs when accepting proposals for contracts. In the understanding that small businesses are integral to the success of the economy and in a simultaneous attempt to provide wounded veterans with viable opportunities to succeed, the government reserves 3% of their annual procurement contracts for qualifying businesses. The requirements for eligibility are far from extensive, in short only requiring that the owner and primary officer of a small business is regarded as a service-disabled veteran by the Department of Veteran Affairs or the Department of Defense.

In his pursuit of this funding, the sales representative colluded with an employee of another local SDVOSB, who agreed to mutually enter into “winner/loser” bid agreements that mutually benefited both parties. In order to execute this, each would trade information regarding the bids they intended to submit. The “loser” bid would purposefully create the illusion of competition by securing a bid for a considerably higher price, which deceived government officials into choosing the less costly contractor.

The salesman solicited insider information from federal agents, providing kickbacks in exchange for precise figures of how much Customs and Border Protection officials would pay for his specific technology contract. These agents, who remain unnamed, were offered a lofty ten percent of the profits from the awarded contract for their provision of access to confidential documents. To further elevate the price, he colluded with employees of a similar SDVOSB to allow him to draft a competing bid that was then submitted under their name, thus making the bids presented by his company seem more affordable in comparison. Together, these practices won him the $24.1 million contract – of which he paid out $351,176 to his Customs and Border Protection informants.

Despite federal vigilance to police SDVOSBs, various types of fraud are actively perpetuated through their existence. Most of these involve the violation of the False Claims Act, a provision of which allows for those with meaningful information to come forward on behalf of the government.

Whistleblower Justice Network Can Help You

Whistleblower Justice Network partners with whistleblowers worldwide to expose schemes that purposefully overcharge the government for goods and services. We work with whistleblowers to help them report violations of the False Claims Act, while maintaining their anonymity and ensuring they file their best possible whistleblower action. Utilizing the False Claims Act, we aid whistleblowers in bringing corporations that use deceptive tactics for personal gain to justice.

If you have meaningful information regarding government procurement fraud that you believe is in violation of the False Claims Act, Whistleblower Justice Network can help. Working alongside world-class legal counsel, we will ensure you are protected to the fullest extent of the law and that you receive credit for the information you bring to the U.S. government. Partnering with whistleblowers is all we do. Visit us at www.whistleblowerjustice.net, or call us at 844-WJN-4ALL, to learn if we can help you.

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