The Department of Justice continues it push to ferret out DBE fraud. Last week prosecutors announced they had intervened in a private whistleblower lawsuit and fined Mountain States Contractors $2,250,000 for posing as a minority owned business. Federal contracting guidelines set aside a certain percentage of government work for disadvantaged business enterprises (“DBE”). Unfortunately, some bigger companies try to masquerade as a service disabled veteran owned or minority owned small business. [Some refer to these companies as DBSE or Disadvantaged Small Business Enterprises – for this post we use the acronyms interchangeably.]
Whistleblower Files DBE Fraud Lawsuit Against Mountain States
Mountain States Contractors is a North Carolina company that builds roads and bridges. It receives millions of dollars each year from the government. According to the whistleblower in this case, Ron Meadows, Mountain States never qualified as a disadvantaged business small enterprise. Ron worked for the company as a foreman.
In his complaint Meadows says that Mountain States affiliated with a company called G & M Associates, the latter being a true DBE small business. In order to qualify for additional contracts, G & M would use their DBE status in order to bid. If successful, Mountain States would then do the work.
To make the scheme appear legitimate, Mountain States said it was “loaning” its employees and equipment to the smaller company.
Despite 20 years of service to the company, Meadows was fired after he told his boss that he would no longer participate in the company’s illegal scheme. Like most whistleblowers, Meadows tried to get his bosses to stop breaking the law. Most whistleblowers report problems internally before going to authorities. In Meadows case, the decision to become a whistleblower was easy. He was fired after complaining.
Meadows Files False Claims Act (Qui Tam) Lawsuit
Passed during the Civil War, the federal False Claims Act allows individuals with inside knowledge of fraud against the government to file a lawsuit in the name of the United States. The government is then given at least 60 days to investigate. The investigation in this case took almost 3 years, but in the end, the Justice Department agreed with Ron Meadows and intervened in his case.
The Act allows whistleblowers to receive between 15% and 30% of whatever the government collects. That means Meadows is entitled to receive between $337,500 and $675,000 plus attorney’s fees. (The Justice Department says he is being awarded $500,000 although it isn’t clear if that sum includes any damages for lost wages.)
The False Claims Act also has an anti-retaliation provision that allows whistleblowers to claim double damages for illegal termination. Those damages can include back and prospective lost wages.
Hindsight is a wonderful thing… it would probably have been much cheaper if Mountain States had just listened to Ron. If the fines and lost wages aren’t enough, the company could lose its ability to work on future government transportation projects.
Government Settles DBE Fraud with Mountain States
As noted above, Mountain States settled the claims alleging it had engaged in DBE fraud by making it appear that a legitimate minority owned small business enterprise was actually doing the work. In announcing the settlement, Nashville’s U.S. Attorney said in a prepared statement,
“Enforcement of the False Claims Act is a top priority of the Department of Justice and this office. This enforcement effort includes investigating schemes to exploit federal programs aimed to help small and minority businesses to compete in the federal marketplace. The U.S. Attorney’s Office will continue to devote the resources necessary to investigated these and other False Claims Act violations in order to protect taxpayers’ interests and aggressively pursue fraud, waste, and abuse.”
A Department of Transportation spokesperson said, “Fraud schemes like that committed by Mountain States harms the integrity of law abiding, small business contractors trying to compete for contracts on a level playing field.”
Purpose of the Disadvantaged Business Enterprise Program
As established in various federal statutes and regulations, Disadvantaged Business Enterprises include business concerns that are Women Owned Small Business (WOSB’s), Veteran Owned Small Business (VOSB’s), Service Disabled Veteran Owned Small Business (SDVOSB’s), Minority Owned Small Businesses and the like. Congress wants these businesses to have an opportunity to participate in government contracts. To fulfill that goal, most agencies set aside a small percentage of their contracting dollars for these businesses. Hopefully these small businesses can use the federal dollars to grow and become more competitive.
When a big business games the system, true DBE’s are shut out of the process. Often these bigger and better established businesses can underbid the DBE. It’s not as if these big businesses still don’t get the lion’s share of contracting work. Typically it is just a very small percentage of work that is set aside for minority or veteran owned businesses. By engaging in DBE fraud, companies like Mountain States are showing just how greedy they are.
Mahany Law Prosecutes DBSE Fraud
The whistleblower lawyers at MahanyLaw are well aware of DBE fraud and are actively investigating claims made by service disabled veteran owned and SBA small businesses. Each year the government contracts for over $400 billion in goods and services. We understand that small businesses are the backbone of our nation and are committed to helping them thrive. Ditto for returning veterans and especially our wounded vets.
Whenever DBE fraud occurs, we are ready to jump in and file claims for our small and minority owned business clients. To date our whistleblowers have received over $100 million. That may seem like a lot of money but as long as fraud continues, we aren’t going to stop. And we aren’t afraid to take on the biggest and baddest companies in the world. In the Bible, little David took on Goliath and won with just a slingshot. Thousands of years later, the battle for justice continues and we are proud to represent the David’s of the world. Brave individuals who stand up to corruption and greed. That includes standing up for those whistleblowers who suffer retaliation.
For more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct). All inquiries are protected by the attorney – client privilege and kept confidential. Not ready to call? Visit our blog for hundreds of text searchable articles on whistleblowing. Have specific questions about SDVOSB fraud or retaliation? We have the answers!
MahanyLaw – America’s Whistleblower Lawyers. Proudly Serving Veteran, Minority & Women Owned Businesses.