The Small Business Administration (SBA) created the HUBZone program to encourage business development in Historically Underutilized Business Zones.HUBZones are typically urban or rural areas with low income and high unemployment.

Thegoal of the HUBZoneProgram was to give small businesses located in these areas an opportunity to contract with the federal government. Instead, it has become a prime target for fraud. Some large companies take advantage of small business owners and use a legitimate HUBZone business as a pass-through to get access to “set-aside” contracts or subcontracts.

It is important to know that a person can be compensated for becoming a whistleblower and exposing companies that are committing fraud against the U.S. government.

Many times, HUBZone businesses are approached with proposals to commit fraud. Here are some common tactics that are used to defraud the HUBZone Program:

• Making false representations about the company’s size, office location or ownership in order to secure a HUBZone certification and qualify for certain set-aside contracts.
• Serving only as a pass-through while performing very little or none of the work actually required under the contract.
• Obtaining HUBZone certification legitimately, but then moving the primary office outside of the zone and/or failing to ensure that at least 35 percent of the employees performing the work reside in a HUBZone designated area.

Knowingly participating in this type of fraud can result in a small business losing its HUBZone certification, facing criminal prosecution or being financially liable for damages in civil actions brought by whistleblowers under the Federal False Claims Act.

Contact Baron & Budd

If you are aware of fraud involving a HUBZone-certified business or if you are the owner of a HUBZone-certified business who has been approached with a proposal to commit fraud, you may qualify to serve as a whistleblower. If the allegations you bring to light are successfully prosecuted by the federal government, you may be entitled to a monetary reward. Please call if you would like more information.