Whistleblower Suit Outs Companies that Falsely Claimed Disadvantaged Business Status

 

Two highway contractors have agreed to pay nearly $2,883,947 to resolve a lawsuit brought by a whistleblower. The whistleblower reported that the companies were falsely claiming they were disadvantaged business enterprises in order to get an advantage in getting lucrative government transportation contracts.

The contractors who agreed to pay up were TesTech, Inc., and CESO (CESO International, LLC and CESO, Inc.). Both contractors are based in Dayton, Ohio. The company owners also were part of the agreement to repay the government.

Whistleblower lawyers have been closely watching a number of False Claims Act cases that relate to companies that make false claims in order to get lucrative federal contracts. Lawyer firm in Georgia. In many fields - from highway building to defense - the Government is just about the only show in town. If a company cannot get government contracts, it essentially cannot operate in the field.

In order to encourage minority-owned and women-owned businesses, a certain percentage of federal-funded transportation project contracts are set aside for woman-owned and minority-owned businesses. In order to get these contracts, contractors have to provide documentation showing that they are owned by minorities or women.

Whistleblower Ryan Parker, a former TesTech employee, filed his lawsuit in the United States District Court for the Southern District of Ohio. He alleged that TesTech was awarded a number of contracts for highway and airport construction in Ohio, Indiana, Michigan and Kentucky. Although TesTech was owned by minority owner Sherif Aziz, Parker claimed that TesTech really was owned and controlled by CESO.

Parker said that TesTech was just a front set up to gain contracts set aside for DBE (disadvantaged business enterprises); the company was really owned and controlled by CESO and its owners, David and Shery Oakes. In order to qualify for minority-owned business contracts, CESO owners David and Shery Oaks falsely claimed that Sherif Aziz owned TesTech. In reality, the suit says, the Oakes and CESO controlled and operated TesTech.

As a whistleblower lawyer, I have been closely watching cases similar to the Testech/CESP lawsuit. Contractors have been arguing that in practical terms they cannot be sued even in situations where the relator and the Government have clear proof that the company lied about whether it was qualified to receive a contract.

These contracting companies admit that technically a suit could be filed, but they argue that the Government should not file the suit because in the end it will not be able to prove it has any damages. False Claims Act cases only make sense, they say, where the defendant is paid to provide something but ends up not providing anything at all, or at least supplies less than it is supposed to provide. By contrast, in these cases, the defendant actually provides the services. As a result, these contractors argue that the Government has no damages that would make the FCA case worth pursuing.

The problem with the argument, of course, is that it undermines Congressional policy. For specific reasons, Congress has made rules about the companies with which it wants to contract. Congress has said it wants to encourage minority-owned, Indian-owned, veteran-owned, and women-owned businesses. If companies can claim to fit in those categories and suffer no damages for what they have done, then ultimately the Government has no way to carry out the policy that Congress says it wants to carry out.

Similarly, Congress has said it only wants to buy goods that are made in America or a country friendly to our nation. If businesses cut corners and buy goods and ingredients from other nations, then companies that try to buy the goods as Congress wanted will be at a competitive disadvantage. In the end, the rule that Congress thought was important will be eroded as more and more companies profit by cheating.