The U.S. government spends over $4 trillion each year. Much of that spending is earmarked for private contractors and suppliers. The government has 2.7 million contracts with private companies.
Congress has said that this spending should be spent on U.S. suppliers wherever possible. Beginning with the Buy American Act during the Great Depression (1933) and continuing through two executive orders signed by President trump, the government requires many goods to be sourced in the United States whenever possible.
While some question the effectiveness of the law, Uncle Sam wants our tax dollars to stay in the United Stated whenever possible. The hope is that by requiring government contractors to buy American, there will be a ripple effect in the economy and U.S. jobs will be protected.
We have already successfully prosecuted Buy America and Buy American (there are two different laws with very similar names) as whistleblower cases. If a contractor is required to buy American and instead buys cheap goods elsewhere, that contractor can be fined and the whistleblower reporting the illegal conduct can receive a cash reward.
Aventura Technologies Busted for Buy America Act Fraud
Recently federal prosecutors charged a Long Island, New York company and its CEO with illegally selling Chinese made security and surveillance equipment to the U.S. government. The Justice Department says that Aventura Technologies, Inc and 7 workers falsely claimed their products were made in the U.S. Of the $88 million imported by Aventura Technologies since 2006, $20 million of that equipment was sold to the government.
Under the False Claims Act wrongdoers who cheat the government are subject to triple damages meaning that the government could require Aventura to pay $60 million. The False Claims Act allows whistleblowers who report these acts to receive between 15% to 30% of the penalties meaning a potential whistleblower reward of $9 million to $18 million.
The Aventura Technologies case is especially troubling because the fraud against taxpayers and the government goes well beyond economic fraud. The products imported were used for government security purposes and could be hacked by our enemies. The United States Attorney for Brooklyn and Long Island, Richard Donoghue, said, “Aventura not only defrauded their customers, but also exposed them to serious, known cybersecurity risks and created a channel by which foreign adversaries and other actors could potentially access some of our government’s most sensitive facilities and computer networks.”
Donoghue said that some of the items were body cams used by security personnel on military bases, Department of Energy facilities and aircraft carriers.
Also charged was Jack Cabasso and his wife Frances. Prosecutors say that Jack ran the company and was the mastermind of the scheme. His wife was the CEO on paper and allegedly secured the contracts by posing as a woman owned business. The couple was also charged with money laundering.
Jack was arrested and ordered detained on November 7th, although with the right to later renew a request for bail.
A recently unsealed affidavit from an FBI special agent says the company got its cameras from the People’s Republic of China. Its catalog, however, touts the equipment as “proudly manufactured” in the U.S. The company also signed paperwork certifying its devices were compliant with the Buy American laws.
In what can only be called bizarre, Jack Cabasso allegedly sent a letter at one point to the GSA accusing his competitors of selling products to that were manufactured in China. Jack called this a “big problem” and said the manufacturer of those products was “actually the Communist Chinese Government and had ‘significant’ cybersecurity issues…”
Jack also made comments to the news media about the use of Chinese made cameras in the US embassy in Afghanistan. Talk about the pot calling the kettle black!
If you think this story can’t get worse, it does. The FBI has a photo of a camera being made in the Chinese factory with Air Force markings on it. That means the Chinese knew the surveillance equipment was destined for the U.S. military.
The prevailing wisdom in the private sector is to always find the best price. Congress and the President, however, want to balance price with national security. National security means making sure surveillance equipment is not susceptible to hacking by our enemies and also means protecting US manufacturing jobs.
Some countries subsidize businesses in their own countries in order to artificially lower prices. That means legitimate businesses in other countries can’t compete and soon go out of business. Once the legitimate competition is destroyed, the bad actors can then raise prices and not fear competition.
We believe it is important to rebuild and strengthen our domestic manufacturing sector. National security is also paramount. If the allegations against Avenura Technologies and the Cabassos are correct, they should be prosecuted. Enforcing the Buy America and Buy American laws is a smart, necessary step to preserve America’s economic and national security.
Buy America and Whistleblower Rewards
We don’t know yet if this case was started by a whistleblower. The criminal charges were just unsealed.
The Buy America laws require companies selling to the federal government or supplying goods used in government funded transportation projects to give a preference to American made goods unless subject to an exemption.
Under the federal False Claims Act, people with inside information about violations of the Buy American laws are eligible to receive cash rewards. Qualifying for a reward requires the “relator” (legal term for whistleblower) to file a sealed complaint in federal court. The case remains secret while the government investigates.
If the case is successful, the relator is entitled to between 15% and 30% of whatever the government collects from the wrongdoer. Million dollar rewards are not uncommon. There is no requirement that the whistleblower be a U.S. citizen.
Retaliation against the whistleblower is illegal and can provide additional damages.
To learn more, please visit our Buy America / Buy American whistleblower reward page. Ready to see if you qualify for a reward? Contact us online, by email or by phone 414-704-6731 (direct). All inquiries are protected by the attorney – client privilege and kept strictly confidential.