Government Partially Settles False Claims Act Cases Arising From Construction Fraud at US Marine Corp Bases Camp Lejeune and Camp Pendleton

The Rabon Law Firm of Charlotte, NC, Berg & Androphy of Houston, TX, and the Abbott Law Firm of Birmingham, AL, announced today that the U.S. Department of Justice (DOJ) has intervened in two cases filed by the firms on behalf of the United States and a Relator, and reached settlements with several California-based construction businesses and two individuals to partially resolve allegations under the False Claims Act that the defendants conspired to defraud the United States in connection with military construction projects at Camp Lejeune in North Carolina and Camp Pendleton in California.

The False Claims Act lawsuits were filed in the U.S. District Court for the Eastern District of North Carolina, in 2012 and 2013, against Frazier Masonry Corporation of Camarillo, California, several small business entities and individuals affiliated with that company, and other corporate entities that are not part of the current partial settlement.

The lawsuits charge that the Frazier defendants conspired with prime contractors that had been awarded large construction contracts for projects at Marine Corp Bases Camp Lejeune and Camp Pendleton to violate the False Claims Act by falsely certifying that qualified disadvantaged small businesses had performed the subcontracted masonry work. In each of the prime contracts, which together totaled in excess of $225 million, the successful general contractors had promised the government that they would comply with a “Subcontracting Plan,” which earmarked certain of the subcontracts to go to legitimate disadvantaged small businesses. Throughout the course of the projects, the prime contractors continued to certify that they were complying in good faith with the Subcontracting Plans, which were expressly made a material part of the contracts. The fraud occurred when the defendants contracted with businesses that were owned, controlled, or were affiliated with Frazier Masonry – a large business entity – to act as the masonry subcontractor. The subcontracts were then performed by Frazier Masonry instead.

The Small Business Act and Federal Acquisition Regulations disqualify small businesses that are owned, controlled, or are affiliated with large businesses, such as Frazier Masonry, from performing subcontracts targeted for small, disadvantaged business enterprises. As a result of this scheme, legitimate small businesses were denied the opportunity to win these subcontracts, and the Government’s SBA program intended to increase the utilization of small business concerns by providing them the “maximum practicable opportunity” to participate in performing contracts issued by any Federal agency was altogether thwarted. The damages to the United States are reasonably calculated to be at least the amount by which the Subcontracting Plan targets were missed due to the frauds.

In resolving their liability under the False Claims Act, the Frazier defendants agreed to pay nearly $1.9 million to the federal government. The amount paid by the Frazier defendants was based on their ability to pay and is not reflective of the true amount of damages to the Government. Other entities remain as defendants in the cases. In addition, in parallel criminal proceedings, two individuals affiliated with the Frazier defendants pleaded guilty to felony charges, and are awaiting sentencing.

The Relator, Rickey Howard, was represented by Chet Rabon and Marshall Walker, of the Rabon Law Firm in Charlotte, North Carolina, together with Joel Androphy, Sarah Frazier, and Rachel Grier of Berg & Androphy in Houston, Texas, and Matt Abbott of the Abbott Law Firm in Birmingham, Alabama. Howard came forward with crucial evidence and assisted the government in exposing the fraud at a tremendous personal and professional cost. However, without the Relator’s information, these frauds would not have been exposed. “Rickey Howard is a man with high integrity. He took brave steps to call out these frauds when others would have stood by silently and done nothing,” said his attorney, Chet Rabon. “America should be proud of citizens like Rickey and others who are willing to do the right thing in difficult circumstances.”

These cases represent a major civil and criminal inroad into combating Small Business Administration fraud through the use of “sham” small businesses – an area the government has targeted for fraud enforcement for many years but with little success. The amount of such “sham” small business fraud that exists in federal government construction contracts is believed to be in the hundreds of millions of dollars.

“The United States Government is the single largest purchaser of goods and services in the world, and because of this, the amount of fraud that is perpetrated against all of us – the taxpayers – is staggering,” added Joel Androphy. “Cases like this prove that the False Claims Act is a success. The message is being sent to general contractors – ‘Don’t do this. It is fraud, it is wrong, you will get caught, and you will pay.’”

Case No.:7:12-cv-215-D (E.D.N.C.)

Case No.:7:13-cv-48-D (E.D.N.C.)

About the Rabon Law Firm, PLLC

The Rabon Law Firm is headed by attorney Chet Rabon, who has practiced law in Charlotte, NC, for more than 24 years. The Rabon Law Firm concentrates in whistleblower representation under the Federal False Claims Act and companion state acts, as well as IRS and SEC Whistleblower fraud cases, and has numerous such cases currently under investigation and in litigation throughout the United States.

About Berg & Androphy

Berg & Androphy, based in Houston, Texas, with offices in Washington, D.C., New York, and Denver, has a nationwide qui tam practice representing whistleblowers in many large fraud cases, including health care, real estate, and defense contractor fraud cases. The lawyers at Berg & Androphy are trial lawyers who are currently litigating numerous qui tam lawsuits without government intervention. Joel Androphy and partner Sarah Frazier supervise a team of trial lawyers in this practice area.

About the Abbott Law Firm

The Abbott Law Firm, L.L.C., represents the legal needs of Alabama, Georgia and Mississippi residents in personal injury and wrongful death cases. From his law practice in Birmingham, Matt Abbott focuses on the litigation areas of tractor-trailer accidents, automobile accidents, defective product liability, and medical and pharmaceutical negligence. Abbott also serves clients who need representation for workers’ compensation as well as those who have been victims of consumer fraud and insurance bad faith.