An Oklahoma construction company has agreed to pay $2.8 million to resolve federal charges that it and some affiliates established front companies that received federal contracts earmarked for disadvantaged small businesses for which the companies weren’t eligible, the Dept. of Justice says.
The settlement, which DOJ announced on June 2, deals with allegations that Tulsa-based Ross Group Construction Corp. violated the False Claims Act by fraudulently inducing the federal government to award set-aside contracts to affiliates that did not meet federal requirements for such contracts, the department said.
Specifically, the government contended that Ross Group established two entities, PentaCon LLC and C3 LLC, to get set-aside contracts for which Ross itself wasn’t eligible.
DOJ also alleged that Ross Group “maintained operational control” over daily and long-range management actions by the two affiliates. Thus, the government contended, PentaCon and C3 also didn’t meet size and other eligibility requirements for set-aside contracts.
Further, the Justice Dept. alleged that Ross Group and the affiliates “concealed their affiliation from the U.S. and knowingly misrepresented the eligibility of PentaCon and C3 for the set-aside contracts.”
When the company last appeared on ENR’s Top 400 Contractors list in 2016, it ranked No. 397, with revenue of $157.3 million in 2015. The current U.S. Small Business Administration “size standard” to be considered small for SBA programs is $39.5 million in average annual receipts for many construction categories and $16.5 million for most specialty-contractor categories.
DOJ said that the claims are only allegations and that there has been no finding of liability.
Ross Group, which is privately held, issued a statement saying that the settlement “does not admit any liability or wrongdoing by the company or any of its employees, officers, directors or owners and … allows us to continue to serve the public, as we have done for the past 41 years."
The company added, “At all stages Ross Group has cooperated fully with the government in reaching this civil settlement.”
It also said, “Ross Group strives to fully comply with all ethical rules, regulations and laws and continuously seeks to improve our training and compliance procedures.”
According to DOJ, the settlement also resolves a whistleblower’s lawsuit filed in 2015 in federal district court in the western district of Oklahoma.
The complaint, filed by Southwind Construction Services LLC, alleges that PentaCon, C3, a foreign company named Red Cedar Enterprises Inc. and several unnamed individuals engaged in fraudulent activity related to federal set-aside contracts. (Red Cedar Enterprises isn't mentioned in DOJ's announcement of the settlement.)
Under the False Claims Act, a whistleblower can receive part of the amount the federal government recovers from the defendant. In this case, the whistleblower will receive about $520,000, according to DOJ.
Southwind said it produced evidence that PentaCon was “directly controlled by and affiliated with Ross Group and was being used by Ross to bid on and receive contracts for which Ross was ineligible. Southwind made similar statements concerning C3.
Southwind claimed in the lawsuit, “Defendants are nothing more than front companies utilized by [Ross Group] to obtain contracts set aside for legitimate small and other disadvantaged concerns and to illegally obtain payments from the government.”
Southwind also alleged that Ross Group “is the one that actually prepares the bids and/or proposals of defendants and performs the work, if awarded, for those companies.”
An appendix to the lawsuit cites federal contracts totaling $254.8 million for 14 federal agencies. The largest amount is $177.1 million in U.S. Army contracts.