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Justice News

Department of Justice
U.S. Attorney’s Office
Middle District of Pennsylvania

FOR IMMEDIATE RELEASE
Wednesday, December 19, 2018

Michigan Corrugated Manufacturer Agrees To Pay $400,000 To Settle False Claims Act Violations

HARRISBURG – The United States Attorney’s Office for the Middle District of Pennsylvania announced today that Arvco Container Corporation of Kalamazoo, Michigan has agreed to pay the United States $400,000 to settle False Claims Act allegations in connection with a contract with the Defense Logistics Agency Acquisition Operations (DLA) in New Cumberland, Pennsylvania.

According to United States Attorney David J. Freed, Arvco Container Corporation (Arvco) violated subcontract limitations imposed by federal regulations and the terms of a contract to provide corrugated boxes to the federal government from August 3, 2010 through August 3, 2014.  The contract was awarded by the DLA in New Cumberland, Pennsylvania to Fibre Technologies LLC (Fibre) located in Reading, Pennsylvania.  The contract was set-aside for eligible HUBZone small businesses in accordance with program requirements administered by the U.S. Small Business Administration.  Federal regulations and the terms of the contract limited Fibre’s ability to subcontract the manufacturing of the boxes to no more than 50 percent.  Arvco performed 100 percent of the manufacturing requirement.  Arvco’s gross profits for the performance of the Contract total $246,682 which will be returned to DLA.  Arvco also agreed to pay a civil penalty amount of $153,318. 

“I commend the dogged investigative efforts of our partners at SBA/OIG and DCIS in this case,” said U.S. Attorney Freed.  “Their outstanding efforts and the excellent legal work by AUSA Timothy Judge have ensured that Arvco’s ill-gotten profits have been returned, and an appropriate penalty has been assessed to deter other contractors from this behavior in the future.  The United States Attorney’s office is steadfastly dedicated to protecting the resources entrusted to us by the taxpayers.”

“Limitations on subtracting ensure that otherwise ineligible businesses don’t use small or disadvantaged businesses merely as vehicles to access set-aside contracts,” said Inspector General Hannibal “Mike” Ware.  “OIG will aggressively investigate violations of limitations on subcontracting to protect the integrity of SBA’s set-aside contracting programs.  I want to thank the U.S. Attorney’s Office and our law enforcement partners for their leadership and dedication throughout this investigation.”

"Today's settlement agreement is the successful result of a joint investigative effort by the U.S. Attorney's Office, SBA-OIG and the Defense Criminal Investigative Service (DCIS)," stated Special Agent-in-Charge Leigh-Alistair Barzey, DCIS Northeast Field Office.  "DCIS will continue to work with its law enforcement partners to ensure the integrity of the Defense procurement process."

SBA’s General Counsel Christopher Pilkerton said, “The settlement in this matter demonstrates the excellent results achieved through the combined efforts of federal agencies to uncover and forcefully respond to procurement fraud.  SBA is strongly committed to identifying and aggressively pursuing instances of fraud perpetrated by those participating in SBA’s procurement programs."

This case was investigated by the United States Attorney’s Office for the Middle District of Pennsylvania, the U.S. Small Business Administration Office of Inspector General, and the Defense Criminal Investigative Service.  The case was litigated by Assistant United States Attorney Timothy S. Judge. 

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

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Updated December 19, 2018