The federal government and many states have programs designed to spur minority, veteran and disadvantaged small businesses. These so-called minority business set aside programs require government agencies to set aside a certain percentage of contract work for qualifying businesses. Unfortunately, many businesses cheat and set up fake companies so that they can get all the work. That does nothing for disabled veterans and other qualified small businesses.
Salina Savage filed a whistleblower suit under the federal False Claims Act in 2014. She accused Jonetta Everano and Jessica Morales ran fake businesses simply to get government contracts. Everano and Morales claimed to be small, disadvantaged businesses. That designation helped them land a piece of the $4.5 billion cleanup of the former Hanford nuclear site.
Salina was a competitor of Everano and Morales. She claims that their actions defrauded taxpayers and legitimate disadvantaged businesses who wanted to compete for the cleanup.
The case is somewhat unusual because Salina is a competitor. The False Claims Act requires that whistleblowers seeking an award possess original source or inside information. That means most whistleblowers commonly work inside the business committing the fraud. The law doesn’t require the insider to be a current or former employee, however.
Properly pleading cases brought by outsiders is an art form, particularly in the many states that have “heightened pleading standards.” These states require actual examples of fraud; the who, what, when and how.
Everano and Morales are disputing the allegations against them. As a preliminary matter, however, they asked the court to dismiss the case because Savage didn’t have enough facts.
This week a federal judge in Spokane refused to dismiss the case. In ruling for Savage, Judge Salvador Mendoza said that Savage had enough details to show the “time, place and nature” of the alleged fraud.
The primary contractor for the Hanford cleanup is CH2M Hill Plateau Remediation Co. One of the largest subcontractors on that project is FE&C. Savage claims that CH2M and FE&C conspired together to create phony businesses that qualified for a minority business set aside. The idea was these business would appear to be owned and operated by a disadvantaged individual but in reality, FE&C would do all the work.
More money for the fraudsters and nothing for legitimate small and disadvantaged businesses.
Savage claims that an FE&C employee, Jonetta Everano, created a company called Phoenix Enterprises Northwest in 2009. As a woman, Everano would qualify for a minority business set aside. Although she would “own” most of the company, Savage says the business was really a front for FE&C. Everano apparently contributed no start up cash or equipment and instead relied on FE&C to do the work. In the words of Judge Mendoza, the business appeared to be a mere “facade.”
Savage caught Everano red-handed and ultimately got the Small Business Administration to declare Everano’s company ineligible. She says that is when Everano teamed up with Morales and created another eligible business, this one a company that took advantage of the HUBZone program that gives contracting preferences to businesses that draw employees from Native American reservations.
Once again, Savage claimed the new company was a fraud and front for FE&C. She believes the new company was formed to appear to qualify for the minority business set aside program.
The case is in its early stages. For now, Salina Savage has beat back all attempts to dismiss her suit. The corporate defendants had previously lost their motions to dismiss the case in October. By beating the motions to dismiss, she is one step closer to a jury trial and victory.
Whistleblower Awards and the Minority Business Set Aside Program
Whistleblowers are the new American heroes. Most are honest, hard working people tired of watching greed and corruption in their workplace. Others like Salina Savage are competitors that simply want to make an honest living and have a level playing field.
Saving money for taxpayers and doing the right thing are enough motivation for most whistleblowers. The False Claims Act, however, pays also pays awards to those who come forward and contains powerful anti-retaliation provisions.
We realize it hard to raise your hand and take a stand against corruption. So did Congress. Since the U.S. Civil War, the False Claims Act pays awards to those with inside information involving government funds or programs. That includes SBA, Department of Defense, and other minority business set aside programs. Awards can be as high as 30% of the amount collected from wrongdoers. In cases like this, the penalties can be as much as three times the contract amount or even higher.
Need more information? Give us a call. Our whistleblower clients have already collected over $100 million in awards. For more information, read our free 12 step guide to whistleblowing or contact attorney Brian Mahany at (414) 704-6731 (direct). All inquiries are protected by the attorney – client privilege and kept confidential.
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