Upstate New York Contractors Combine to Pay More than $1 Million to Resolve False Claims Act Investigation

SYRACUSE, NEW YORK – Upstate Construction Services, LLC (Upstate) and Structural Associates, Inc. (Structural) have agreed to pay more than $1 million in total to resolve allegations that they improperly obtained government contracts set-aside for companies qualified as historically underutilized business zone (HUBZone) firms, announced United States Attorney Grant C. Jaquith.

The United States occasionally utilizes government contracting to promote small businesses, including firms that qualify as HUBZone entities.  To be eligible for these contracts, a firm must qualify as a small business, have its principal office located in a HUBZone, and have a certain percentage of employees live in a HUBZone. 

The settlements resolve allegations that Upstate (which was a qualified HUBZone entity) and Structural (which was not) entered into a set of agreements – including two Silent Joint Venture Agreements – that were not disclosed to the government.  The agreements enabled Upstate to obtain bonding on jobs that it otherwise would not have been able to obtain, and in exchange Structural (which could not have bid on the jobs itself or as part of a joint venture with Upstate) received approximately half of Upstate’s profits on government contracts worth millions of dollars. 

United States Attorney Grant C. Jaquith said:  “Openness and integrity are critical to the fair and effective implementation of federal contracting assistance programs, including programs designed to help small businesses from economically distressed communities.  Secret agreements between firms to share profits on government contracts undermine the integrity of these programs, which we will continue to protect by persistently pursuing these cases with our investigative partners.”

“The settlement agreement announced today is the successful resolution of a joint investigation conducted by the Defense Criminal Investigative Service (DCIS), the U.S. Army Criminal Investigation Command and the U.S. Attorney’s Office, Northern District of New York,” stated Leigh-Alistair Barzey, Special Agent-in-Charge, DCIS Northeast Field Office.  “The integrity of the U.S. Department of Defense procurement process is of vital importance and is a DCIS investigative priority.  The DCIS will continue to work with its law enforcement partners to hold Defense Contractors accountable and ensure that quality products and services are provided to the U.S. military in compliance with contractual requirements.”

The investigation and settlement were the result of a coordinated effort among the U.S. Attorney’s Office for the Northern District of New York, the Defense Criminal Investigative Service, and the United States Army Criminal Investigation Command. The United States was represented by Assistant U.S. Attorney Michael D. Gadarian.