ALBANY — Broadway Electric, Inc., Cornerstone Contracting, Inc., CEO John Oehler and President Christian Blake agreed to pay $21.3 million to resolve False Claims Act allegations that they improperly obtained federal contracts reserved for service-disabled, veteran-owned small businesses and other eligible small businesses.
“Broadway, Cornerstone and their executives engaged in a multi-year scheme to exploit federal contracting programs set aside for small businesses owned and controlled by service-disabled veterans,” First Assistant U.S. Attorney for the Northern District of New York John A. Sarcone III said in a press release.
“When contractors circumvent eligibility rules through misrepresentation and undisclosed control arrangements, they undermine the integrity of federal procurement.
“These programs are designed to aid our nation’s heroes. It is unfortunate that these defendants sought to exploit the sacrifices our service members have made.
“My office will continue to aggressively pursue individuals and entities who engage in that conduct.”
THE SETTLEMENT
Federal contracts may be set aside for small businesses that meet specific eligibility requirements, including those owned, controlled and operated by service-disabled veterans of the U.S. military.
These service-disabled veteran-owned small businesses, or SDVOSBs, are intended to provide contracting opportunities to qualifying veteran entrepreneurs.
The settlement resolves allegations that, from approximately April 2017 through May 2025, the defendants engaged in a coordinated scheme to obtain federal set-aside contracts Broadway and Cornerstone were not eligible for by using SDVOSBs and other small businesses as pass-through entities.
Neither Oehler or Blake is a service-disabled veteran and neither qualified to own or control a SDVOSB. And although contracts were set aside by law for qualifying small businesses, Broadway and Cornerstone personnel primarily controlled execution, staffing and financial administration.
According to the settlement agreement, the defendants admit, acknowledge and accept responsibility for the following conduct:
— Broadway and Cornerstone identified contracting opportunities and prepared and priced bids submitted in the names of purported small businesses, including through teaming agreements, joint ventures and mentor-protégé structures.
— Broadway and Cornerstone secured bonding, selected subcontractors and personnel to perform contract work, and primarily controlled project execution and financial administration, including payroll. The purported small businesses received fixed payments, typically approximately 1-3% of total contract value and not tied to the scope of work performed while the remaining contract revenue flowed to Broadway, Cornerstone and contractors they selected.
— Broadway and Cornerstone personnel used small-business email domains and exercised signature authority in communications with federal agencies on behalf of the small businesses. At least one SDVOSB owner raised concerns regarding compliance with federal control and participation requirements, but the defendants did not implement material changes to the structure or operation of the arrangements.
Oehler and Blake were directly involved in establishing, maintaining and directing the arrangements throughout the relevant period.
They were informed of federal requirements that SDVOSBs control contract performance and receive commensurate benefits for their work, but did not materially alter the structure or operation of the arrangements they had established and maintained.
The civil settlement includes the resolution of claims brought under the qui tam provisions of the False Claims Act by two relators, a veteran of the U.S. Air Force and an executive employed by an SDVOSB firm.
The False Claims Act allows private individuals to file suit on behalf of the United States for false claims and share in any recovery.
Under the settlement agreement, the relators will receive $3,674,250.
TASK FORCE TO ELIMINATE FRAUD AND THE NATION FRAUD ENFORCEMENT DIVISION
This year, the Trump administration launched the Task Force to Eliminate Fraud and the National Fraud Enforcement Division to enhance their war on fraud, waste and abuse in federal programs.
When unscrupulous actors exploit these programs for their own financial gain, they defraud the government, harm the people these programs are designed to aid and protect, and undermine American businesses that play by the rules.
False Claims Act enforcement plays a critical role in combatting such fraudulent schemes, recovering billions of dollars for the American taxpayers and holding wrongdoers accountable.
The resolution obtained in this matter was the result of a coordinated effort by the U.S. Attorney’s Office for the NDNY and the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, with assistance from the Department of Veterans Affairs Office of Inspector General, Defense Criminal Investigative Service, Department of the Army Criminal Investigation Division, General Services Administration Office of Inspector General, Small Business Administration Office of Inspector General, Small Business Administration Office of General Counsel, and U.S. Postal Inspection Service.
The matter was investigated by Assistant U.S. Attorney for the NDNY Adam J. Katz and DOJ Trial Attorney James Nealon.