We can never offer enough gratitude to our fighting men and women. Our soldiers put their lives on the line everyday protecting our freedom. In recent years, much media attention has been focused on how we provide healthcare for veterans. There is another story, however. The story about a military housing system in shambles.
The Army, Navy, Marine Corps, Air Force and Coast Guard spend tens of millions of dollars housing our soldiers and their families. A recent investigation by the Army’s Inspector General found that most residents of military housing fear for their safety.
Fear is a powerful word but people are truly worried about mold, lead, asbestos, water and sewage. It’s easy to blame the military but Uncle Sam contracts out most of that work. And based on experience as whistleblower lawyers, we know that much of that work is substandard.
The Army Housing Investigation
The Army surveyed residents at 48 of 49 bases with private housing. The Army found that private housing units had one maintenance worker per 2,181 homes. In the commercial real estate world that number is usually one per 100 to 150 units.
According to the report, “At nearly all (48 of 49, 98%) locations, residents expressed concerns with safety or environmental issues and some level of dissatisfaction with their privatized housing experience.” 52% of those surveyed expressed environmental concerns.
We owe military families are very best. The families of our soldiers shouldn’t be worried about mold or lead poisoning. Substandard housing is not acceptable for our military families and shouldn’t be to taxpayers who are footing the bill.
Whistleblowers and Government Contracting
Although the Army Inspector General’s report was limited to private base housing, the problem with poor construction spans across all military construction programs. Several years ago, we successfully prosecuted a case where a government contractor cut corners by using Chinese steel on a military hospital.
Under the federal False Claims Act, whistleblowers with inside information about fraud against the government or involving federal funds are eligible for cash rewards. Depending on who ultimately prosecutes the case and the value of the insider’s (whistleblower’s) information, the person first reporting the fraud could receive between 15% and 30% of whatever is collected from the wrongdoer.
That is a powerful incentive to come forward. Worried about retaliation? That’s also illegal and allows the victim to receive double lost wages and attorney’s fees.
Shoddy building by itself is not enough for a False Claims Act case. Uncle Sam can always sue a contractor for negligence but there won’t be a whistleblower reward. But if the contractor lies about the defects or tries to hide them, that becomes fraud and fraud triggers the False Claims Act and whistleblower cash rewards.
Examples of successful government building cases that can be prosecuted under the False Claims Act include:
- Substituting cheap foreign steel for American made steel (Buy American Act)
- Failing to pay prevailing wages but certifying otherwise (Davis Bacon Act)
- Lying about substandard building materials
- Falsifying test results
- Using unqualified workers
- Misuse of small business or disadvantage business enterprise designations
- Lying about hours or worker qualifications on time and material contracts
- Billing at inflated rates
- Inflating material costs
- Bid-rigging
- Paying bribes and kickbacks to obtain construction work
The military sets aside many contracts for Service Disabled Veteran Owned Small Businesses. Fraud in that program can also get you a whistleblower reward.
Circle C Construction and Ft. Campbell
Circle C signed an agreement with the Army to construct buildings at the Fort Campbell military base. Circle C’s agreement included determinations of hourly wages for electrical workers with a base hourly rate of $19.19, plus fringe benefits of $3.94 an hour.
Circle C was an experienced government contractor and understood the prevailing wage requirements under the Davis Bacon Act. One of Circle C’s contractual obligations on the Fort Campbell project was to pay electricians according to the wage determinations required by the contract. That obligation extended to any subcontractors they might employ.
Circle C apparently complied with the law for its own workers but did not do so for one of its subs, a company called Phase Tech. One of Phase Tech’s workers, an electrician names Wall, filed a whistleblower complaint alleging he was not properly paid. Not only was he not properly paid, he claimed Circle C was certifying to the government that workers on the Army project were paid prevailing wages.
Phase Tech quickly settled with the government and paid up. Circle C, however, said it should not be penalized for the conduct of one of its subcontractors. The court disagreed and held them liable as well.
The court said the “totality of the circumstances show that Circle C, an experienced contractor, made false statements, acted in reckless disregard of the truth or falsity of the information, and that the false statements were “material” to the government’s decision to make the payment sought in Circle C’s claim.”\
Whistleblower Gets $150k in Utah Construction Company Case
Abel Saiz is a Native American that owns a small construction company in Utah. His company wanted to bid on several government construction projects including one at Hill Air Force Base. He formed a mentor -protégé agreement permitted under SBA rules. This program that allows a small business to form a joint venture with a larger more experienced company. The bigger company gets to work on projects designated for small business set asides and the smaller company gains valuable experience.
The rules require the small business perform at least 15% of the labor. Immediately after the two businesses started working together, Saiz complained that he wasn’t getting enough work. He also claimed that the larger company, Okland Construction, was falsifying records to make it appear that Saiz’ employees were getting hours.
Saiz complained but to no avail. A manager of Okland allegedly told him that they would “bury him in court.”
Saiz filed a whistleblower complaint under the False Claims Act. In 2014, Okland agreed to pay the government $928,000 to settle the charges. Abel Saiz was given a $148,480.
In announcing the settlement, an SBA spokesperson said, “SBA’s contracting programs, including the 8(a) Business Development Program, provide small businesses with the opportunity to grow and create jobs. But SBA has no tolerance for waste, fraud or abuse in any government contracting program and is committed to working with our federal partners to ensure the benefits of these programs flow to the intended recipients.”
Earlier this year, a Massachusetts company was prosecuted under the same whistleblower law for lying about its eligibility for federal HUBZone status. Classic Site Solutions (CSS) and its owner Cheryl Sady agreed to pay $1.3 million in penalties.
Prosecutors claimed that CSS and Sady made false statements to the Small Business Administration to obtain certification as a Historically Underutilized Business Zone (“HUBZone”) company. Congress authorized the HUBZone program to support small businesses that locate in geographic areas that have a poor record of attracting business. The program is designed to stimulate the economy and create jobs in these areas.
According to the False Claims Act complaint, CSS and Sady falsely claimed to that CSS’s principal office was located in a designated HUBZone. After fraudulently obtaining a HUBZone certification, CSS was awarded government contracts worth millions of dollars that had been set aside for qualified HUBZone companies.
Seeking Whistleblowers in Military Housing and Construction Case
We wish we could help every military family struggling with unsafe or unlivable housing. We can’t do so directly but with the help of whistleblowers, we can make a big difference.
If you work for a construction company or other business involved in military housing and have knowledge of fraud, contact us immediately. With your help we can help stop these shady business practices and improve housing for our service members. We may also be able to get you a cash reward. (These rewards are available for any government contract fraud and are not limited to military housing.)
Rewards are generally only paid to the first person to report. If you are sitting on the fence, call us so we can discuss your concerns. Wait too long and someone else may get the reward first.
To learn more, visit our government contractor fraud whistleblower page. Ready to see if you qualify for a reward? Contact us online, by email *protected email* or by phone 202-800-9791.
All inquiries are protected by the attorney – client privilege and kept strictly confidential. We accept cases worldwide. We want to stop those who are ripping off Uncle Sam (meaning our tax dollars) or knowingly building substandard military housing.
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