Five Gardena, California tech companies have agreed to pay over $5.8 million to resolve allegations they obtained small business government contracts through misrepresentation and fraud, thereby violating the federal False Claims Act (FCA).
A competitor company and the competitor’s managing member Anthony Colangelo will split a $1.4 million whistleblower award for filing the initial claim that exposed the FCA violations, the U.S. Justice Department announced Wednesday.
Minburn Technology’s Anthony Colangelo Reports En Pointe Gov. Inc. Using Whistleblower Law
Virginia-based Minburn Technology Group and its managing member Anthony Colangelo brought the original whistleblower claim in 2014. The claim alleged that, from 2011 to 2014, En Pointe Gov. Inc., En Pointe Technologies Inc., En Pointe Technologies Sales Inc., Dominguez East Holdings LLC and Din Global Corp. falsely represented a company called En Pointe Gov. Inc. (“En Pointe”) as a small business in order to obtain government-funded contracts specifically set aside to aid small businesses.
The whistleblowers also claim the IT contractors underreported sales to avoid paying fees under their General Services Administration (GSA) contract.
En Point Hoax Alleged in Whistleblower Lawsuit to Swindle SBA Contracts
Federal agencies set aside approximately 23% of their contracts for small businesses. Competition for these contracts is high, and requirements for eligibility are express and detailed. The five defendants allegedly represented En Pointe as meeting all necessary requirements to conduct work under the Small Business Administration (SBA) guidelines. As a result, the federal government granted En Pointe SBA contracts over a span of three years, from 2011 to 2014.
Federal investigators discovered that En Pointe was integrated with the defendant companies, and therefore did not meet small business criteria and was not eligible for SBA contract work. “Small businesses, in some cases, are eligible to receive a preference when government contracts are issued,” said Eileen M. Decker, U.S. Attorney for the Central District of California. “Large companies that fraudulently solicit and obtain contracts under small business set-aside programs, like the companies in this case, not only abuse the system but also harm legitimate small businesses by taking those contracts away from them.”
IT Company Allegedly Profited via False GSA Reports per Colangelo’s Whistleblower Claim
Other allegations claim En Pointe underreported sales on quarterly GSA reports between 2008 and 2015. Under the GSA schedule contract terms, federal agencies could purchase En Pointe products and services. In return, En Pointe was to return a percentage of its sales to GSA. By underreporting sales, En Pointe was allegedly able to avoid paying GSA the total amount owed.
Minburn Technology and Colangelo Awarded $1.4M
IT products and services vendor, Minburn Technology Group, and its managing member, Anthony Colangelo, filed their whistleblower claim under the qui tam (whistleblower) provisions of the FCA (False Claims Act). As the government chose to intervene (take over the case) in this lawsuit, the whistleblowers were eligible to receive between 10% and 30% of the total government recovery. In this case, Minburn and Colangelo will share 24% of the $5.8 million settlement, or approximately $1.4 million. The defendants admitted no liability in this case.
“Contractors who misrepresent their eligibility for government contracts, or fail to pay amounts owed under those contracts, undermine the integrity of the procurement process,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The Justice Department will take action to fully protect taxpayer funds.”
False Claims Act experts and whistleblower lawyers report there is an strong upward trend of competitors using the qui tam provisions of the U.S. and individual state False Claims Acts to battle cheating competitors to create a level playing field for business including the recent Ameri-Source Electrode anti-dumping suit.