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Justice News

Department of Justice
U.S. Attorney’s Office
District of Minnesota

Thursday, March 22, 2012

U.S. Files False Claims Act Suit Against East Grand Forks Construction Company

MINNEAPOLIS – The United States Attorney’s Office for the District of Minnesota
recently filed suit against an East Grand Forks construction company charging that it violated the
False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act
(“FIRREA”) by making false statements to the Small Business Administration (“SBA”) and the
U.S. Army Corps of Engineers. On March 15, 2012, the suit was filed in U.S. District Court in
Minneapolis against R.J. Zavoral & Sons, Inc., John Zavoral, Peter Zavoral and Craig

The allegations relate to the Heartsville Coulee Diversion construction contract for flood
control work in and around East Grand Forks. The Corps of Engineers had set the contract aside
for a qualified Section 8(a) business concern under the SBA’s Section 8(a) Program. To qualify
for contract award, R.J. Zavoral & Sons entered into a joint venture with a qualified Section 8(a)
business concern. Pursuant to the joint venture agreement, the Section 8(a) business concern was
to be the managing partner and would perform a minimum of 51 percent or $2 million of the
work under the contract, whichever was less.

The U.S. alleges that R.J. Zavoral & Sons made numerous false statements to both the
SBA and the Corps of Engineers in order to be awarded the Heartsville Coulee Diversion
Section 8(a) contract, to retain the contract, and to claim and receive payments of federal monies
made under the contract. Soon after contract award, the defendants began undercutting the
Section 8(a) Program by refusing to abide by the terms of the joint venture agreement and the
SBA’s Section 8(a) regulations. This resulted in harm to the Section 8(a) business concern and
caused the U.S. to pay millions of dollars to the joint venture with little or no benefit to the
Section 8(a) Program.

The purpose of the 8(a) Program is to promote the business development of small business
concerns owned and controlled by socially and economically disadvantaged individuals so that
such concerns can compete on an equal basis in the American economy.

Pursuant to the False Claims Act, the U.S. is entitled to seek three times the amount it was
damaged plus penalties. Under FIRREA the U.S. is entitled to a civil penalty of up to $1.1
million, or up to $5.5 million for continuing violations.

Assistant U.S. Attorney David W. Fuller is representing the interests of the U.S. in this case,
entitled United States of America v. R.J.Zavoral & Sons, Inc., etc. al, Civil No. 12-668 (MJDLIB).



Updated April 30, 2015