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Virginia Security Contractors Illegally Obtained $31 Million in Government Contracts

April 4, 2013 — The U.S. False Claims Act helps the government fight fraud that that costs the American taxpayers money. The anti-fraud statute contains qui tam language that encourages conscientious informants to bring a lawsuit for the government by allowing whistleblowers to participate in any recovery. Should the United States choose to intervene, the tipster takes home a smaller portion of the recovery. If the government decides not to participate, the whistleblower (also called the “relator”) receives a greater share of the proceeds.

Government Contractors Illegally Obtain Contracts Meant for Minority-Owned Businesses

Executives at two security consulting firms have pleaded guilty to submitting false claims to the government in order to secure over $31 million in government contracts. In 2001, Keith Hedman, who is Caucasian, created a security service consulting company in Arlington, Virginia. The listed president and CEO of the business was an African-American woman. This allowed the company to receive competitive-bid and sole-source contracts reserved for disadvantaged and minority-owned small businesses, as part of the Small Business Administration’s (SBA) Section 8(a) program.

In 2003, the African-American company president departed, and the business was no longer eligible for the 8(a) program. Hedman then formed a shell company, which ostensibly would be run by one of Hedman’s employees, Dawn Hamilton, who is Portuguese, with a background of social disadvantage. According to the Justice Department, Hedman deceived the SBA by claiming that Hamilton alone ran the shell company, when in truth, the shell business was run by Hedman and senior management at the initial firm. The shell company, Hedman devised, could continue to receive 8(a) contracting preferences that the initial security services firm was no longer qualified for.

Until February 2012, Hedman ran the shell business, not Hamilton. Hedman forged Hamilton’s signature on documents she had never seen and kept control of the company’s bank accounts. In 2011, Hedman took $1 million in cash from the shell company and split it among Hamilton and three more co-conspirators. Hedman and Hamilton used the shell company to submit false claims to the government, amounting to more than $31 million in illegally-obtained contracts, which brought in over $6 million in payments and salaries for the co-conspirators.

On top of everything else, Hedman admitted that he had agreed to pay a $50,000 bribe to a government official for assistance in landing further government contracts for the shell business.

Hedman, Hamilton, and other co-conspirators have now pleaded guilty to a number of criminal charges on which they await sentencing.

False Claims Act Violations by Government Contractors Uncovered by Insiders

Fraud against the government often involves criminal charges, as in this case, as well as allegations of civil misconduct under the False Claims Act. Government contractors that obtain contracts illegally by lying to the SBA about their minority status are often found out by insider employees expected to keep quiet about the scam. Before notifying the government, courageous insiders should learn their rights under the False Claims Act. The experienced lawyers at Waters & Kraus provide informants with the aggressive legal representation they deserve. Contact us or call our government contractor fraud attorneys at 800.226.9880 to discuss how we can safeguard the interests of government collaborators.

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