The federal government provides many programs to aid socially or economically disadvantaged individuals or groups in obtaining business opportunities or projects. Some of those are well known and others are somewhat more obscure.

The Department of Justice recently announced a settlement with HD Supply Waterworks (Waterworks), the nation’s largest supplier of water, sewer, fire protection and storm drain products. The settlement is slightly less than $5 million.

Waterworks attempted to avail itself of an unfair advantage by utilizing subcontractors under the Disadvantaged Business Enterprise program (DBE). The United States Department of Transportation (DOT) and the United States Environmental Protection Agency (EPA) have programs intended to provide opportunities for the socially and economically disadvantaged. As you might expect, the DOT and EPA have promulgated regulations to clearly indicate when the use of a DBE is appropriate. Unfortunately, Waterworks claimed to have conducted business with the now defunct American Indian Builders & Suppliers Inc. (AIB). AIB would collect a small percentage of the subcontract amount as compensation for allowing Waterworks joint use of its name and status as a DBE qualified business. AIB did not work on the project nor did they supply materials to any of these federally funded projects.

The Department of Justice has recently focused on the improper use of these disadvantaged entities by prime contractors as a way to gain an advantage when bidding on contracts. The programs to aid socially or economically disadvantaged individuals will only benefit those groups if the groups are actual participants in the contract and do not operate as a sham. In addition to this “American Indian” entity, legitimate minority and women owned businesses are afforded an opportunity to compete fairly on projects. Fraud in the program upsets the intended purpose and diverts grant funds away from worthy recipients.

The improper utilization of any government program like DBE can be considered fraud and is probably actionable under the False Claims Act. The state of New Jersey has its own False Claims Act which is very similar to the federal act. Individuals who are aware of fraud against the state or federal governments can report the fraud and receive a reward. Under the False Claims Act in New Jersey and under the federal act, the individual reporting the fraud, called a “relator”, is entitled to receive a reward of between 15% and 30% of the amount recovered by the government.

If you believe that someone is improperly utilizing a DBE, whether it be handicapped, minority or woman owned, you can report the information to the state or federal government and you may be entitled to recover under the False Claims Act. If you have information, which is not otherwise public, regarding fraud against the state or federal government, you should contact a qualified attorney specializing in the area of the False Claims Act or whistleblower litigation.

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