The Small Business Administration (SBA) created the HUBZone program to encourage business development in Historically Underutilized Business Zones.HUBZones are urban and rural areas with low income, high poverty or high levels of unemployment.  In addition, they are regions experiencing a military base closure, a major natural disaster or a catastrophic event that qualifies them for federal disaster aid.

TheHUBZoneProgram was intended to provide legitimate small businesses with a pathway for contracting with the federal government. Unfortunately, it has become a prime target for fraud mostly by larger companies intent on using a legitimate HUBZone business as a pass-through to get access to so-called “set-aside” contracts or subcontracts.

Business HUBZone Qualifications

A business must have the following to qualify for the HUBZone program:

  • Be a small business as determined by the SBA
  • Be at least 51 percent owned and controlled by U.S. citizens, a Community Development Corporation, an agricultural cooperative, a Native Hawaiian organization or a Native American tribe
  • Have its principal office located in a HUBZone
  • Have at least 35 percent of its employees living in a HUBZone

The full qualification criteria for the program are available in Title 13 Part 126 Subpart B of the Code of Federal Regulations (CFR). Prospective program participants can also get a preliminary assessment of whether they qualify at the SBA’s Certify website.

Identifying HUBZone Fraud

Small businesses sometimes need to collaborate with larger companies. There are legitimate ways to engage in such a partnership and the SBA provides extensive guidance on how to do so. Unfortunately, HUBZone businesses often lie about their status or partner with other businesses in an unlawful manner. A few of the most common fraudulent schemes include:

  • Making false representations about the company’s size, office location, or ownership in order to secure HUBZone certification.
  • Serving only as a financial 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 HUBZone or failing to ensure that at least 35 percent of the employees performing the work reside in a HUBZone.

Participating in such a fraudulent scheme can potentially cause a small business to lose its HUBZone certification, face criminal prosecution or be financially liable for damages in civil actions brought by whistleblowers under the False Claims Act (FCA). A whistleblower who brings a successful lawsuit under the FCA is entitled to between 15% and 30% of the amount the government recovers.

Our Team

With more than 30 years of experience, the attorneys on Baron & Budd’s whistleblower representation team have represented dozens of clients in government fraud cases returning over $5.4 billion to federal and state agencies, with whistleblower recovery shares as high as 49%. They are ready to help if you have evidence of fraud involving the HUBZone program.

Please call (866) 401-5971 or complete our contact form if you would like more information. For more information, see What You Need to Know About Becoming a Whistleblower. Please understand that contacting us does not mean that you have established an attorney-client relationship with Baron & Budd, P.C.

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