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U.S. Sues Florida Business for Alleged Procurement Fraud

The Justice Department announced that it has intervened in a qui tam lawsuit filed under the False Claims Act by a whistleblower against Air Ideal, Inc.  According to its website, Air Ideal, Inc. is a multi-regional construction company based in Winter Park, Florida that provides general construction services and has current annual revenue of over $10 million.

According to the complaint filed by the government, Air Ideal allegedly received government contracts set aside for companies located in a Historically Underutilized Business Zone (“HUBZone”) by falsely certifying that it was located in a HUBZone when it was not.

The HUBZone program helps small businesses in urban and rural communities gain preferential access to federal contracts.  It was enacted as part of the Small Business Reauthorization Act of 1997 and is overseen by the Small Business Administration (“SBA”).  Specifically, the SBA decides which small businesses qualify to receive HUBZone contracts and maintains a listing of all approved HUBZone businesses so that federal agencies can locate vendors.

In order to qualify as a HUBZone business, the following criteria must be met:

  • It must meet the SBA’s “small business” standards;
  • It must be owned and controlled at least 51% by U.S. citizens, a Community Development Corporation, an agricultural cooperative, or an Indian tribe;
  • Its principal office must be located within a HUBZone; and
  • At least 35% of its employees must reside in a HUBZone.

In May 2013, Patricia Hopson, an employee of Pavkov Contracting Co., an Air Ideal competitor, filed a whistleblower lawsuit under the qui tam provisions of the False Claims Act against Air Ideal and its co-owner, Kim Amkraut.  In her complaint, the whistleblower claimed that in performing her duties as a project coordinator at Pavkov, she allegedly learned that Air Ideal listed an address in its HUBZone application that was nothing but a “virtual office” that provided mail forwarding services, but at which, no Air Ideal employees actually worked.  The whistleblower also alleged that the actual location of Air Ideal was not in a designated HUBZone.

The federal government filed its own complaint in the whistleblower’s case alleging that Air Ideal obtained millions of dollars’ worth of contracts from the U.S. Coast Guard, U.S. Army, U.S. Department of the Interior, and U.S. Army Corps of Engineers using its allegedly fraudulently procured HUBZone certification.

If the government is successful in its case against Air Ideal, the whistleblower may be entitled to a reward under the qui tam provisions of the False Claims Act.