Two Construction Companies Pay $3.6 Million Dollar to Settle SBA Fraud Allegations
A United States Department of Justice investigation of two construction companies and their owners has resulted in a $3.6 million settlement following allegations that the companies defrauded the Small Business Administration (SBA). The fraud resulted from false statements in the SBA bid process for federal government contracts.
The SBA program at issue has the stated goal of assisting small disadvantaged businesses that are applying for federal contracts by setting aside for them five percent of federal contract dollars. Michael Vigil controlled 91 percent of VMJ Construction, LLC. John Vigil controlled the remaining nine percent. John Vigil was also a manager of Vigil Contracting, Inc. In VMJ’s 2011 application for the SBA program and in annual updates to SBA, VMJ stated it was eligible for the program. Although VMJ was accepted into the SBA program in 2011, Vigil Contracting was a graduate of the program and was not eligible to participate in the program in 2011. Subsequently, VMJ was awarded several federal contracts.
The Department of Justice charged that VMJ’s application and updates were misleading and false because it was not performing the contract work. DOJ’s investigation revealed that VMJ had obtained a bid from Vigil Contracting to perform the work and used the offices, employees and contractors of Vigil Contracting to complete the work.
The Department of Justice determined that the statements made by VMJ in its bid and updates to SBA were intended to deceive SBA into believing that VMJ was performing the work as a minority and disadvantaged business. In reality, Vigil Contracting performed the work, even though it was ineligible for the SBA program. As a result of the DOJ’s investigation, VMJ and Vigil Contracting agreed to pay $3.6 million to settle allegations that they defrauded the SBA.
This case serves as an important reminder of the severe consequences that may result from making false statements in federal government contract applications and other submissions.