June DOJ/SBA FCA Settlements Highlight Continued Focus on Contractor Compliance

In June, DOJ announced two False Claims Act settlements targeting alleged fraud against the Small Business Administration’s (“SBA”) set-aside contract program for service-disabled veteran-owned small businesses (“SDVOSBs”). The settlements resulted in a combined recovery of $24.9 million and both resolved underlying lawsuits launched by qui tam complaints. Together, these back-to-back settlements suggest that the government is surging resources to both anti-fraud issues generally, and to alleged SBA fraud in particular.

The first settlement, announced on June 2, 2026, involved allegations that Officium Global LLC falsely certified compliance with the SBA’s SDVOSB set-aside contract requirements between May 2017 and June 2018. According to the Government, Officium was “awarded seven set-aside contracts to which it was not entitled because its management and daily business operations were not controlled by a service-disabled veteran” and it represented that “it met all requirements to be a service-disabled veteran-owned small business when it did not.” A related entity, Loyal Source Government Services LLC, allegedly caused breaches of the seven contracts awarded to Officium Global with respect to its SDVOSB representations, in violation of the Contract Disputes Act. To resolve those claims, the companies agreed to pay over $3.6 million. The claims were raised in a qui tam action. See United States ex rel. Lavin v. Loyal Source Government Services, LLC et al., No. 6:19-cv-958-ORL-41LRH (M.D. Fla.). As noted in the press release, the settlement “illustrates the emphasis on combating government contracting fraud,” especially when it involves the SBA’s programs focused on service-disabled veterans.

Consistent with that apparent emphasis, just one week later, on June 9, 2026, DOJ announced an even larger settlement with Broadway Electric Inc. (“Broadway”); its subsidiary, Cornerstone Contracting Inc. (“Cornerstone”); and two of their individual executives, for $21.3 million to resolve similar False Claims Act allegations. The claims at issue 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 allegation 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 latter settlement, the SBA’s General Counsel emphasized the “enhanced efforts” the SBA is taking to uncover fraud in its programs. These enforcement actions reinforce 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.

These settlements suggest 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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