News and Press Releases

Kentucky-Based Defense Contractors Agree To Pay $6.25 Million To Resolve Allegations That They Submitted False Statements And Claims To Obtain Army Contracts


– Wrongfully obtained Army contracts to build Fort Campbell courthouse and maintain Army facilities in Fort Knox

FOR IMMEDIATE RELEASE
December 5, 2012

LOUISVILLE, Ky. – The United States Department of Justice, the United States Attorney’s Office for the Western District of Kentucky, the Office of the Inspector General for the Small Business Administration; and the Office of the Inspector General for the Department of Defense, today announced a $6.25 million dollar settlement with Kentucky-based Lusk Mechanical Contractors and Commonwealth Technologies to resolve allegations that they submitted false statements to the Small Business Administration and false claims to the United States Army.

The United States alleged that the companies, and Commonwealth owners Harry Lusk and Wendell Goodman, made or caused to be made false statements to the Small Business Administration (SBA) to obtain certification as a Historically Underutilized Business Zone (HUBZone) company, and then used this certification to wrongfully obtain Army contracts to build a courthouse in Fort Campbell, Kentucky, and to complete maintenance and other repairs to Army facilities in Fort Knox, Kentucky.

“They abused a program meant to assist small businesses located in financially disadvantaged communities,” stated David J. Hale, U.S. Attorney for the Western District of Kentucky. “Today’s multimillion dollar settlement is the result of a successfully coordinated effort among law enforcement agencies and my office, working together to hold these business owners accountable.”

“As our economy continues to improve, the HUBZone program provides a critical lifeline to small businesses that voluntarily chose to locate in areas that often have difficulty attracting business,” said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division. “Companies that set up sham offices not only break the law, but deprive the HUBZone communities and legitimate HUBZone businesses of the benefits of the HUBZone program.”

"This investigation is the result of a highly successful joint effort by the Defense Criminal Investigative Service (DCIS) and one of our key law enforcement partners - the SBA's Office of Inspector General. Fraud in military contracting undermines the confidence of the American public who demand a military procurement system that spends their tax dollars wisely and responsibly. In this case, it is alleged that Lusk Mechanical Contractors created a sham HUBZone front company in order to obtain millions of dollars in set aside HUBZone contracts from Fort Campbell and Fort Knox to which Lusk was not entitled. This investigation should serve as a warning for those intent on defrauding the U.S. military and American public that DCIS will aggressively investigate these matters," said Bret Flinn, Resident Agent in Charge of DCIS' Dayton Resident Agency."

“The HUBZone Program offers significant benefits to eligible small businesses and is an important tool for unlocking the potential of historically underutilized business zones,” said Inspector General Peggy E. Gustafson of the Small Business Administration. “Preferences for federal contract awards must not be given to persons who lie in order to claim eligibility. I applaud the dedication and perseverance of our law enforcement partners as justice is served here today on behalf of the American taxpayer.”

“SBA's contracting programs, including the HUBZone program, provide small businesses with the opportunity to grow and create jobs,” stated SBA's General Counsel Sara Lipscomb. “But, SBA has no tolerance for waste, fraud or abuse in any government contracting program and is committed to ensuring the benefits of these programs flow to the intended recipients. SBA works closely with our federal partners to prevent bad actors from participating in contracting programs and taking action and holding those accountable when they lie to or mislead the government.”

Under the HUBZone program, companies that maintain their principal office in a designated HUBZone, and meet certain other requirements, can apply to the SBA for certification as a HUBZone small business company. HUBZone companies can then use this certification for preferential access when bidding on government contracts.

The United States alleged that in February 2005, Commonwealth submitted a HUBZone application to the SBA. Commonwealth's business office was identified on the application as 212 East Caroline Street, Irvington, Kentucky (a historically underutilized business zone). The United States alleged that this location was a vacant office space with no employees, and that Commonwealth’s application failed to disclose that Wendell Goodman and Harry Lusk were, in fact, affiliated with Lusk Mechanical (at the time, Harry Lusk and his wife were the sole owners of Lusk Mechanical and Wendell Goodman was the Chief Executive Officer of Lusk Mechanical). The United States further alleged that the application failed to disclose that Commonwealth did not operate as an independent company in that Lusk Mechanical and Commonwealth shared facilities, equipment, personnel, insurance and bonding and that there was a financial relationship between Commonwealth and Lusk Mechanical. The United States contended that Commonwealth operated out of Lusk Mechanical’s headquarters, which was not located in a HUBZone area. Using the fraudulently obtained HUBZone certification, the companies obtained contracts from the Army that had been restricted to qualified HUBZone companies.

The United States contends the conduct being resolved today violated the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), which imposes substantial penalties for making false statements to the SBA, and violated the False Claims Act as well. Under the terms of the settlement, Commonwealth, Lusk Mechanical, Goodman, and Lusk have agreed to pay $3,741,739.96, and to forfeit $2,506,260.24 seized by federal agents from their bank accounts under a civil forfeiture action.

This matter was handled by Benjamin Schecter and Amy Sullivan, Assistant United States Attorneys for the Western District of Kentucky, and the Commercial Litigation Branch for the Department of Justice. It was investigated by the Office of the Inspector General for the Small Business Administration and the Office of the Inspector General for the Department of Defense, Defense Criminal Investigative Services.

The claims settled by this agreement are allegations only, and there has been no determination of liability.

Return to Top

USAO Briefing Room
USAO Homepage
Stay Connected with Twitter
Project Safe Neighborhoods

Our nationwide commitment to reducing gun crime in America

Project Safe Childhood

Help us combat the proliferation of sexual exploitation crimes against children.

Prescription Drug Abuse

Combating Prescription Drug Abuse in Kentucky

Victim Witness Assistance

Making sure that victims of federal crimes are treated with compassion, fairness and respect

Rights for our Service Members

www.SERVICEMEMBERS.gov

USAO in Spanish

Justice 101