The Small Business Administration maintains several programs and opportunities to help historically underserved communities and demographics. One such program is known as the Historically Underutilized Business Zone program, also known as the HUBZone program. Under HUBZone rules, preferential treatment may be available for potential business owners seeking to start or expand their business located in a historically under-utilized business area. These areas usually include remote rural areas, certain urban areas, Indian reservations, and areas surrounding military bases.
If an applicant is seeking funding from the SBA for his or her business venture and that resides in a designated HUBZone, preferential treatment will be offered. In order to qualify, the business must be a “small business” according to the SBA’s definition, must be owned by at least 51% American citizens, and at least 35% of its employees must reside within the HUBZone.
Unfortunately, as with any government-funded program, the potential for fraud lurks in the background, and one recent settlement highlights the need for fraud-minded weary citizens to be on constant lookout for the unlawful misuse of federal funds.
On April 8, 2015, the Department of Justice announced its settlement with Air Ideal, Inc., a company alleged to have wrongfully obtained HUBZone funds using fraudulent means. The company, along with its majority owner Kim Amkraut, agreed to pay $250,000 to resolve the matter, as well as pay the government five percent of its gross revenues for the next five years – a unique and relatively unknown civil remedy in a False Claims Act lawsuit.
Details of the alleged misconduct by Air Ideal, Inc.
Air Ideal, Inc. is a Florida-based company located in the Orlando area. According to its website, it specializes in mechanical and general construction services and claims to be a “self-certified women’s based enterprise.”
According to the DOJ, Air Ideal applied for – and was awarded – special funding due to its perceived principal place of business in a HUBZone. However, according to the whistleblower’s complaint, the company’s principal place of business was actually a “virtual office” where no Air Ideal employee actually worked. In reality, Air Ideal’s staff and management were operating out of another office not located in a HUBZone. Unbelievably, Air Ideal actually fabricated a lease agreement for the HUBZone property, along with several other falsified documents submitted for purposes of qualifying for HUBZone funds.
As a result of its false certification, Air Ideal was awarded contracts from the U.S. Coast Guard, U.S. Army, U.S. Army Corps of Engineers, and the U.S. Department of the Interior. Not only was Air Ideal not eligible for these set-asides, it also prevented other eligible and qualified HUBZone businesses from accessing the opportunities.
The whistleblower in the matter, a member of the construction industry, was awarded $42,500 for her role in uncovering the fraud.
Contact Berger & Montague, P.C. today
If you are considering a whistleblower lawsuit and would like to discuss your options, please contact Berger & Montague, P.C. today.