In The News

IT Companies Pay $5.8 Million for Fraud Relating to Small Business Status and Contract Fee Payments

The government’s effort to crack down on fraud that has been allegedly committed against its agencies sometimes snares a multitude of companies that supposedly acted together.  This was illustrated earlier this month, when the Department of Justice announced that En Pointe Gov. Inc., En Pointe Technologies Inc., En Pointe Technologies Sales Inc., Dominguez East Holdings LLC and Din Global Corp had all agreed to pay a combined total of $5.8 million to settle charges that the companies violated the False Claims Act by certifying that En Pointe Gov was a small business.  The Government charges that this claim was made in order to obtain contract set asides for small businesses.  Moreover, the government alleges that these companies underreported sales under a General Services Administration (GSA) contract in order to avoid paying fees.


“These companies defrauded the government in two ways, each of which cost taxpayers,” said U.S. Attorney Eileen M. Decker for the Central District of California. “Small businesses, in some cases, are eligible to receive a preference when government contracts are issued.  Large companies that fraudulently solicit and obtain contracts under small business set-aside programs, like the companies in this case not only abuse the system but also harm legitimate small businesses by taking those contracts away from them.”  The government alleged that between 2011 and 2014, the defendants made false claims that En Pointe Gov, Inc (now known as Modern Gov IT Inc) met Small Business Administration (SBA) requirements to obtain work that was set aside for small businesses only.  The government’s contention is that En Pointe Gov Inc.’s affiliation with the other defendants in this case rendered it a non-small business thus disqualifying it from small business set-aside contracts.


Additionally, the government alleged that the defendants caused En Pointe Gov. Inc. to file false quarterly reports with the GSA between 2008 and 2015 that underreported sales made under a GSA contract.  The contract allowed other federal agencies to purchase from En Pointe which was also obligated to return to GSA a percentage of its sales receipts.  Thus, En Pointe underpaid the fees it owed the GSA by allegedly misrepresenting the amount of its sales.  “Federal contracts set aside for small businesses are intended to grow the economic base of the nation,” said SBA Inspector General Peggy E. Gustafson.  “The Office of Inspector General will aggressively investigate such misrepresentations to ensure only eligible businesses are awarded these contracts.”


The settlement resolves allegations filed in a lawsuit by Minburn Technology Group, LLC (Minburn) and Anthony Colangelo, Minburn’s managing member.  The lawsuit was filed under the qui tam, or Whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  Minburn and Mr. Colangelo will receive approximately $1.4 million.  If you know of fraud that has been committed against the government or one of its agencies, you are encouraged to report it and to contact a Qui tam law firm.  Attorneys there will be able to advise you as to your rights under the laws government False Claims Act violations.