The U.S. Small Business Administration Gets Serious about Fraud and False Claims in SBA Small Business Programs
Late last week the U.S. Small Business Administration issued a new regulation which will have a significant impact on the fight against fraud in the federal small business program. The proposed regulations were for public comments, which are due by November 7, 2011.
In fiscal year 2010, the United States spent more than $109 billion on prime contracts with small businesses, so this is a major area of expenditure. Additionally, of course, the small businessman or woman is an important fixture of American mythology, right along with the family farm, etc.
Fraud in small business contracting therefore does damage over and above the obvious damage to the American taxpayer. For example, there is significant damage to honest small businesses, who loose business to the bad guys. Always and everywhere, bad actors who are willing to cheat or lie will sometimes come out ahead of the good guys who refuse to engage in such tactics.
Perhaps the most common fraud scheme seen in the small business contracting world is the false certification of compliance with the SBA set-aside program. In this scenario, a business that is not a small business certifies itself as a small business, or forms a subsidiary company so that it may continue to qualify as a small business.
Many times, it is difficult to prosecute such violations, because judges and many lawyers sometimes have difficulty understanding the nature of the damages. Hence the need for this new regulation, which creates a "presumption of a loss" for false certifications by small businesses.
Perhaps most important is this: the "loss presumed" to the United States when small businesses falsely certify their compliance with the SBA rules is the entire value of the contract. In other words, if a small business falsely certifies its compliance with any of the requirements for the SBA set-aside program under which the contract is awarded, every single invoice submitted to the government is false.
And if a private person with first-hand knowledge of fraud in a SBA program comes forward to bring a qui tam claim under the federal false claims act, not only would every dollar billed to the Government be the damages, but that amount would be multiplied times three. And there would be an additional civil penalty of between $5500 and $11,000 for each invoice submitted.
As the Congressional Hearing Memo from this week points out, the government actively seeks — and indeed relies on — private citizens to come forward with evidence of fraud on the government. Such private citizens can be handsomely rewarded under the federal False Claims Act.
Posted by Zachary Kitts at 11/5/2011 1:50 PM 
Categories: Virginia Qui Tam filings, Litigation, Qui Tam practice in Virginia, Virginia Whistleblowers, False Claims Act, Qui Tam litigation, legal blogs, False Claims Act Practice in Virginia
Tags: Virginia Fraud Against Taxpayers Act State false claims act news Qui Tam Litigation in Virginia Federal False Claims Act
Categories: Virginia Qui Tam filings, Litigation, Qui Tam practice in Virginia, Virginia Whistleblowers, False Claims Act, Qui Tam litigation, legal blogs, False Claims Act Practice in Virginia
Tags: Virginia Fraud Against Taxpayers Act State false claims act news Qui Tam Litigation in Virginia Federal False Claims Act
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