Our Blog

False Statements Accountability Act Liability for SDVOSB Fraud: Former Owner and Operator of Construction Company Sentenced for False Representations Made to Obtain Service-Disabled Veteran-Owned Small Business (SDVOSB) Set-Aside Contracts

Posted Feb 22, 2013
Benjamin D. Greenbergview author profile and contact info

On January 31, 2013, U.S. District Court Judge Mossman sentenced John Witty to pay a $206,844 fine, serve five years on probation, and perform 100 hours of community service at a veteran’s organization for knowingly making false representations to the Department of Veteran Affairs (“VA”) about being a service-disabled veteran in order to obtain SDVOSB set aside contracts.

Witty, the former owner and operator of Gray Bear Construction pleaded guilty to one count of false statements and representations under 18 U.S.C. § 1001—also known as the False Statements Accountability Act.  Witty, a veteran, admitted that despite knowing the VA had denied his application for a service-connected disability (a prerequisite to being able to claim Service Disabled Veteran status), as owner and operator of Gray Bear Construction he falsely represented to the VA that his company was a SDVOSB.  As a result of Witty’s false representations, the VA had awarded Gray Bear Construction approximately $5,849,372 in SDVOSB set-aside contracts, all of which the company was ineligible to receive.

The False Statements Accountability Act provides a broad and frequently used mechanism to penalize contractors for dishonesty in their dealings with the federal government.  A party runs afoul of the Act by knowingly or willfully making a materially false oral or written statement, representation, or omission (i.e. concealing information) to the federal government in any matter within the jurisdiction of an agency of the federal government.  Individuals convicted under the Act can face potential prison sentences of up to five years and fines of up to $250,000, while convicted corporations can face fines of up to $500,000.

Witty’s conviction stemmed from a blatant offense of the False Statements Accountability Act, and thus provides a clear example for contractors of what not to do.  However, the False Statements Accountability Act may also be used to penalize contractors that simply fail to require their employees to take reasonable steps to confirm the accuracy of information submitted to the government.

The Department of Justice’s (“DOJ”) prosecution of Witty also serves as a reminder of the current trend of the VA and DOJ vigorously investigating and prosecuting actual or perceived federal procurement fraud.  According to a press release issued by the DOJ, Witty is the 15th individual prosecuted during the past year for defrauding a VA program intended to provide preference to service-disabled veterans for federal set-aside contracts, and the VA is “diligently investigating others elsewhere who have similarly defrauded this program and expect additional prosecutions.” Accordingly, government contractors should ensure they are verifying the veracity of statements or submissions made to the federal government.