Total Settlement: $36 Million
Baron & Budd represented the relator in this case which led to one of the largest-ever FCA settlements involving Small Business Administration fraud, including the second-largest FCA settlement against an individual in history. ADS Tactical, Inc (“ADS”), its principals, and its subsidiaries allegedly induced the federal government to award a number of small business set-aside contracts by misrepresenting its eligibility for those contracts and engaging in illegal bid-rigging schemes that inflated prices paid by the government.
Several of the key persons involved in the civil settlement also pled guilty to criminal charges. For example, Ron Villanueva and Samuel Caragan, who had worked for companies allegedly involved in the fraudulent scheme, pled guilty to charges related to their role in defrauding the government. Villanueva, a former Virginia state delegate, was sentenced to two and a half years in prison and ordered to pay $524,000 in restitution. Caragan was sentenced to four years of probation, including six months of home detention and ordered to pay over $240,000 in restitution. In addition, the co-founder and former CEO of one of those companies, Khalil “Kal” Naim, pled guilty to one count of aiding and abetting a false statement his wife made to help win federal contracts. Naim was sentenced to one month of incarceration and ordered to pay $479,641.23 in restitution.
Andrew Miller, one of the Baron & Budd counsel representing the relators, said: “[A]ll too frequently in FCA cases, we see corporations consider fraud settlements as simply a cost of doing business. It’s very reassuring for us and our clients to see that the Department of Justice is serious about holding individuals accountable as well.”
Below is an explanation of each settlement:
- Luke Hillier—$20 Million: The majority owner and former CEO of ADS, Luke Hillier, was held accountable for his alleged efforts to misrepresent the size of his companies in order to win small business set-aside contracts. Hiller agreed to pay $20 million, the second-largest FCA settlement ever collected against an individual and one of the first significant settlements following the issuance of the Department of Justice’s Yates Memorandum, which emphasized the need to pursue individual liability for those involved in corporate wrongdoing. The whistleblowers were awarded $3.6 million of this settlement.
- ADS—$16 Million: ADS agreed to pay $16 million for allegedly misrepresenting its eligibility requirements for multiple small business set-aside contracts by concealing the company’s affiliations with several businesses it controlled or owned. The relators were awarded $2.9 million from this settlement.
- The Affiliated Companies—$620,000: MJL Enterprises LLC, a military supplier of industrial official and medical equipment, agreed to pay $400,000 to settle allegations of its involvement in the scheme and that it had misrepresented itself as a service-disabled veteran-owned small business. SEK Solutions, a seller of weapon and industrial storage products, agreed to pay $140,000 for its similar alleged misrepresentation of its eligibility to bid on and receive certain set-aside contracts for qualified women-owned small businesses. The company also allegedly misrepresented itself as a socially or economically disadvantaged business under the Small Business Administration’s 8(a) Program. Karda Systems, a supplier of tactical gear, agreed to pay $80,000 to settle allegations that it also had misrepresented itself as a socially or economically disadvantaged business under the 8(a) Program.
- Charles Salle—$225,000: The former general counsel for ADS, Charles Salle, agreed to pay $225,000 for his alleged participation in the schemes described above.
Press Releases: https://www.justice.gov/opa/pr/former-ceo-virginia-based-defense-contractor-agrees-pay-20-million-settle-false-claims-act