Government Contracts Monitor

Truth or Dare: The Benefits of Voluntary Disclosure and Cooperation in False Claims Investigations

January 15, 2013

Montgomery, Alabama construction company Caddell Construction Co. (“Caddell”) recently agreed to a non-prosecution agreement in which the company will pay a $2 million penalty to resolve Department of Justice (DOJ) allegations that the company made false statements in connection with the Mentor-Protégé and Indian Incentive Programs.

Caddell worked on three military construction projects at Fort Bragg, North Carolina for the Department of Defense (DOD).  Caddell entered into a Mentor-Protégé agreement with Mountain Chief Management Services (“Mountain Chief”), a small disadvantaged business and an Indian-owned business.  Under the Mentor-Protégé program, DOD reimburses the mentor firm for costs the mentor firm incurred providing developmental assistance to the protégé firm.  Under the Indian Incentive Program, DOD pays prime contractors 5% of the amount those contractors pay to an Indian-owned subcontractor performing on a DOD contract.

DOJ alleged that Caddell submitted false requests for payment in connection with its assistance to Mountain Chief, including false summary timesheets.  Additionally, DOJ alleged that the company knew that it “significantly overstated the amount of developmental assistance the Company had provided to Mountain Chief.”  See December 20, 2012 Non-Prosecution Agreement.  DOJ also alleged that the reports submitted by Caddell regarding Mountain Chief’s development as a protégé company made false statements that the company had 40 employees and over $18,000,000 in gross revenues when the company was much smaller.  Finally, DOJ also alleged that Caddell overstated the work Mountain Chief actually performed on the contracts.  Caddell received approximately $1.2 million from the Government under the Mentor-Protégé and Indian Incentive Programs.

DOJ agreed to a non-prosecution agreement concerning Caddell’s involvement in the Mentor-Protégé and Indian Incentive Programs. Under the two-year agreement, Caddell agreed to pay $2 million, not to commit any crimes, and to cooperate with the DOJ’s ongoing investigation into the conduct (a former Caddell employee and the son of Mountain Chief’s owner were charged individually).  DOJ noted Caddell’s “substantial cooperation with the Department and the Company’s remedial efforts . . . including improving reporting systems, corporate governance, and compliance training and oversight.”   The company stated that it conducted an internal investigation, made a series of voluntary disclosures to DOJ, and fully cooperated with the DOJ investigation.

The settlement demonstrates the importance of conducting internal investigations, cooperating fully with the Government’s investigation, and providing a voluntary disclosure when required.  As costly and burdensome as these steps may sometimes be, a non-prosecution agreement from DOJ is certainly worth the cost.

 

Brian Stolarz is the attorney responsible for the content of this article.