SAN DIEGO (CN) - Three men who never served in the armed forces used their two companies to defraud the United States of $11.8 million in contracts set aside for disabled veterans, Uncle Sam claims in court.
The United States sued Andrew R. Otero, CEO of his co-defendant company A&D General Contracting, of Santee; A&D's vice president William Ali "Al" Pourian; and Action Telecom and its co-owner Bruce Madden. None of the men are military veterans. It also sued Roger Ramsey, a disabled veteran who is listed as co-owner of Action Telecom.
Since 2009, the men have submitted bids for contracts through the Service-Disabled Veteran-Owned Small Business programs, according to the Feb. 26 lawsuit.
An SDVOCB small business must be majority-owned and controlled by a service-disabled veteran. It may enter a joint venture with a non-qualifying business, but the SDVOCB must control at least 51 percent of the joint venture.
Madden transferred controlling interest in Action Telecom to Ramsey in 2009, making it eligible to bid on SDVOCB contracts, the government says.
A&D was never eligible to bid on SDVOCB set-aside contracts.
Using Action Telecom's SDVOCB qualification, the four individual defendants then formed a joint venture between Action and A&D. Action was represented as owning 51 percent of it, and A&D 49 percent.
They then rearranged the joint venture so that A&D was to keep 98 percent of every SDVOCB contract they won, and Action was to keep 2 percent of it, the government says - but they never revealed that the terms of the joint venture had changed.
The defendants then billed $11.8 million for three SDVOCB contracts, and were paid it, Uncle Sam says.
It seeks civil penalties, treble damages for false claims, and damages for fraud and unjust enrichment.