Florida Contractors and Owner to Pay More than $7.7 Million to Resolve False Claims Act Allegations Relating to Procurement of Small Business Contracts

HX5 LLC and its owner and Chief Executive Officer, Margarita Howard, located in Fort Walton Beach, Florida, and an affiliated joint venture HX5 Sierra LLC, located in Cleveland, Ohio, have agreed to pay the United States $7,759,693.92 to resolve allegations that they violated the False Claims Act by knowingly providing false information to the Small Business Administration relating to HX5’s and HX5 Sierra’s eligibility for federal set-aside contracts intended for small businesses owned and controlled by socially and economically disadvantaged individuals.

“Small business set-aside contracts assist small businesses, including socially disadvantaged companies, to compete in the American economy,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “When companies misrepresent their eligibility for such contracts, they prevent others from receiving the business opportunities Congress intended.”

The SBA’s 8(a) business development program is intended to help small businesses owned and controlled by socially and economically disadvantaged individuals. Once certified, 8(a) Program participants are eligible to receive federal contracting preferences. The settlement announced today resolves allegations that HX5, HX5 Sierra and Howard fraudulently obtained six 8(a) contracts during the period Jan. 1, 2015, to Dec. 31, 2021. More specifically, the government alleged that HX5 and Howard failed to report distributions and payments to Howard’s family members and allegedly provided false information to SBA regarding Howard’s assets. The government further alleged that if HX5 and Howard had provided accurate information it would have resulted in HX5’s termination from the SBA 8(a) Program, which, in turn, would also have made HX5 Sierra ineligible for 8(a) set-aside contracts. As a result of the alleged false statements, HX5 improperly maintained its status as an 8(a) Program participant, and HX5 and HX5 Sierra were awarded 8(a) set-aside contracts by the National Aeronautics and Space Administration (NASA), the U.S. Army, and the U.S. Air Force for which the companies were not eligible. 

“We are very pleased with today’s agreement,” said U.S. Attorney Jason R. Coody for the Northern District of Florida. “This result demonstrates a coordinated effort among our agency partners to ensure that disregard for the integrity of small business contracting will not go unchecked.”

“Individuals that provided fraudulent information to gain access to SBA funds intended to support eligible small businesses will face justice,” said Special Agent in Charge Amaleka McCall-Brathwaite of the SBA’s Office of Inspector General’s Eastern Region. “Today’s settlement sends a strong message that those responsible will be held accountable. I want to thank the U.S. Department of Justice and our law enforcement partners for their support and dedication to pursuit of justice in this case.”

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Vantage Systems Inc. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. The qui tam case is captioned U.S. ex rel. Vantage Systems, Inc. v. HX5 LLC, et al., et al., No. 20-cv-3649 (N.D. Fla.). As part of today’s resolution, Vantage Systems will receive $1,357,964.00.

The resolution obtained in this matter was the result of a coordinated effort among the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section and the U.S. Attorney’s Office for the Northern District of Florida, with assistance from the NASA Office of the General Counsel, NASA Office of Inspector General, Air Force Office of General Counsel, Air Force Office of the Judge Advocate General, Air Force Office of Special Investigations, Army Office of the Judge Advocate General, Army Criminal Investigation Division, the Defense Contract Audit Agency, the Defense Contract Management Agency, and the Small Business Administration’s Office of Inspector General. 

The matter was handled by Trial Attorney Laura Hill of the Justice Department’s Civil Division, former Trial Attorney Andrew Jaco of the Justice Department’s Civil Division (now with the Justice Department’s Criminal Division), and Assistant U.S. Attorney Mary Ann Couch for the Northern District of Florida.   

The claims resolved by the settlement are allegations only and there has been no determination of liability.