North Florida Shipyards Agree to Pay $1 Million to Settle False Claims Act Allegations

The Small Business Administration is a federal agency tasked with assisting Americans interested in opening and maintaining a small business. Funding is directed each year to the SBA as an investment in the American economy, much of which is allocated to offering small business loans and grants to those who are eager to get started, but do not have the capital to do so. Moreover, the SBA routinely works with historically disadvantaged groups to get their business off the ground – providing entrepreneurial opportunities that would otherwise be nothing more than a dream for many individuals.

One such program offered by the SBA is known as the Service-Disabled Veteran-Owned Businesses Program, which established a government goal of awarding not less than 3 percent of all prime and subcontract awards to small businesses owned by disabled veterans of the United States military. The idea behind the SDVOBP is to encourage these business owners and provide regular, steady work that may otherwise not be available.

As with any federally-funded agency, however, the SBA’s disabled veterans program has been targeted by fraudsters, and the North Florida Shipyards recently agreed to pay $1 million to settle allegations it defrauded the SBA through its SDVOBP.

Details of the allegations against North Florida Shipyards

The case against the North Florida Shipyards and its CEO Matt Self began upon the filing of a whistleblower lawsuit by two former employees – both of whom are set to share an $180,000 reward for coming forward. Allegedly, NFS created a fake small business known as Ind-Mar, Inc. for the sole purpose of applying for and winning contracts from the federal government.  More specifically, NFS falsely certified that Ind-Mar, Inc. met the SBA’s eligibility requirements for a SDVOSB contract to repair Coast Guard ships, which state that the company must be “operated and managed by service-disabled veterans and must perform at least 51 percent of the labor.”

According to the allegations, NSF created Ind-Mar as a “contracting vehicle” and NSF itself performed 100 percent of the work repairing the Coast Guard ships. The government further alleged that, had it known Ind-Mar was nothing but a front, it never would have awarded the contracts to NSF and would have sought eligible businesses elsewhere.

Government’s comments

The federal government has been combatting fraud against the military since the 1800’s, and fraud involving government contracts for decades. According to U.S. Attorney A. Lee Bentley III:

“Special programs to assist service disabled veterans are an important part of the SBA’s business development initiative…. [f]alse claims such as this undermine the integrity of this vital program and, where found, will be vigorously pursued by our Office.”

Officials from the SBA rendered similar sentiments:

“This settlement sends a strong message to those driven by greed to fraudulently obtain access to contracting opportunities set-aside for deserving small businesses owned and operated by service disabled veterans….We are committed to helping ensure that only eligible service disabled veteran-owned small businesses benefit from that SBA program.”

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