June DOJ/SBA FCA Settlement Highlights Continued Focus on Contractor Compliance

On June 9, 2026, DOJ announced a settlement with Broadway Electric Inc. (“Broadway”); its subsidiary, Cornerstone Contracting Inc. (“Cornerstone”); and two of their individual executives, for $21.3 million to resolve False Claims Act allegations. The settlement targeted alleged fraud against the Small Business Administration’s (“SBA”) set-aside contract program for service-disabled veteran-owned small businesses (“SDVOSBs”). The settlement suggests that the government is surging resources to both anti-fraud issues generally, and to alleged SBA fraud in particular.

The claims against Broadway and Cornerstone were raised by two whistleblowers, a veteran and an executive at an SDVOSB company, on April 28, 2023. See United States ex rel. Welch, et al. v. American First Contracting Inc., et al., No. 3:23-cv-0525 (N.D.N.Y.). According to the allegations in the Settlement Agreement—many of which the settling parties admitted to—from April 2017 through May 2025, the companies engaged in a scheme to use SDVOSBs or other small businesses as “pass-through” entities in order to receive set-aside contracts reserved for qualifying small businesses. The Settlement Agreement described “teaming agreements, joint ventures, and mentor-protégé relationships” as facilitating the alleged fraud. The qualifying small businesses “received a fixed percentage of the contract value, typically between approximately one and three percent,” in exchange for serving as the primary contractors. Broadway and Cornerstone allegedly maintained control over operations, and their employees “managed project finances, payroll, and administration; selected and compensated the purported small business’s personnel; and, in certain instances, used service-disabled veterans’ and other small-business owners’ email domains and signature authority to communicate with government agencies, creating the appearance that the small business independently controlled and performed the work required under the contracts at issue.” Broadway’s CEO and Broadway and Cornerstone’s President allegedly directed such practices, resulting in their personal liability under the Settlement Agreement.

In announcing this settlement, the SBA’s General Counsel emphasized the “enhanced efforts” the SBA is taking to uncover fraud in its programs. This enforcement action reinforces that DOJ and this Administration remain focused on the substance of contract performance, not just the formal structure of the entities involved. Companies that participate in SBA contracting programs should consider reviewing their subcontracting practices to ensure that day-to-day operations align with program requirements and representations made to the government.

This settlement suggests that compliance with SBA contracting requirements will remain an area of significant FCA risk. Government contractors should be prepared for heightened scrutiny of the specific eligibility requirements.

A copy of the Broadway and Cornerstone Settlement Agreement can be found here.

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