Fraud Friday – Florida SBA Participant Pays $7.7 Million to Resolve False Claims Act Allegations

July 7, 2023

Delaney Sexton
Contributing Editor

Fraud Friday – Florida SBA Participant Pays $7.7 Million to Resolve False Claims Act Allegations

“Small business set-aside contracts assist small businesses, including socially disadvantaged companies, to compete in the American economy,” says Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “When companies misrepresent their eligibility for such contracts, they prevent others from receiving the business opportunities Congress intended.”

Last week, the Office of Public Affairs announced that HX5 LLC, its owner and CEO Margarita Howard, and affiliated joint venture HX5 Sierra LLC have agreed to resolve allegations of violating the False Claims Act. Almost $7.76 million will be paid out to settle claims that the company knowingly provided false information to the SBA.

According to the settlement, HX5 and HX5 Sierra received six 8(a) contracts from 2016 to 2021 through fraudulent representations. HX5 and Margarita Howard allegedly did not disclose distributions and payments made to Howard’s family members. The government also alleged that they gave false information about Howard’s assets to the SBA. Consequently, had the appropriate and correct information been given to the SBA, HX5 would have been terminated from the 8(a) program, making them ineligible for 8(a) set-aside contracts.

Due to the alleged misrepresentations and concealed information, HX5 was able to maintain its place in the 8(a) program and be awarded with 8(a) set-aside contracts by NASA, the U.S. Army, and the U.S. Air Force.

This settlement contains the resolution of claims under the whistleblower provisions of the False Claims Act. Vantage Systems will receive $1.35 million as part of the resolution reached.

“We are very pleased with today’s agreement,” says U.S. Attorney Jason R. Coody for the Northern District of Florida. “This result demonstrates a coordinated effort among our agency partners to ensure that disregard for the integrity of small business contracting will not go unchecked.”

The 8(a) business development program helps small businesses owned and controlled by socially and economically disadvantaged individuals so they have equitable access to federal contracting opportunities. 8(a) program participants that obtain government contracts present a niche for lenders. Lenders can support small businesses with the fulfillment of their contracts and give these businesses the financing to perform successfully under the program – after you complete the appropriate checks to ensure the validity of the borrower’s information that is.

Source:
DOJ Press Release