OCTOBER 29, 2014—The U.S. Department of Justice says that North Florida Shipyards, Jacksonville, FL, and its president, Matt Self, will pay $1 million to resolve allegations that they violated the False Claims Act by creating a front company, Ind-Mar Services Inc., in order to be awarded Coast Guard contracts designated for Service Disabled Veteran Owned Small Businesses (SDVOSBs).
The settlement resolves allegations originally filed in a lawsuit by Robert Hallstein and Earle Yerger under the qui tam, or whistleblower provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery. The act also allows the government to intervene and take over the action, as it did in this case. Hallstein and Yerger will receive $180,000.
"Those who expect to do business with the government must do so fairly and honestly," said Acting Assistant Attorney General Joyce R. Branda for the Justice Department's Civil Division. "We will not tolerate contractors who seek to profit at the expense of our veterans and taxpayers."
To qualify as a SDVOSB on Coast Guard ship repair contracts, a company must be operated and managed by service disabled veterans and must perform at least 51 percent of the labor. The government alleged that North Florida created Ind-Mar merely as a contracting vehicle and that North Florida performed all the work and received all the profits. The government further alleged that if the Coast Guard and the Small Business Administration (SBA) had known that Ind-Mar was nothing but a front company, the Coast Guard would not have awarded it contracts to repair five ships.
In December 2013, the SBA suspended North Florida, Matt Self, Ind-Mar and three others from all government contracting. In April 2014, North Florida and Matt Self entered into an administrative agreement with the SBA in which they admitted to having created and operated Ind-Mar in violation of its Coast Guard contracts and SBA statutes and regulations.
"Special programs to assist service disabled veterans are an important part of the SBA's business development initiative," said U.S. Attorney A. Lee Bentley III for the Middle District of Florida. "False claims such as this undermine the integrity of this vital program and, where found, will be vigorously pursued by our Office."
"This settlement sends a strong message to those driven by greed to fraudulently obtain access to contracting opportunities set-aside for deserving small businesses owned and operated by service disabled veterans," said Inspector General Peggy E. Gustafson for the SBA. "We are committed to helping ensure that only eligible service disabled veteran owned small businesses benefit from that SBA program."
The investigation was a coordinated effort by the Civil Division, the U.S. Attorney's Office for the Middle District of Florida, the Department of Homeland Security's Office of Inspector General and the SBA Office of Inspector General.
The Justice Department says that the claims resolved by the settlement are allegations only, except to the extent that North Florida and Matt Self have admitted to the conduct in their agreement with the SBA.