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Justice News

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

Tuesday, April 21, 2015

East Grand Forks Construction Company Pays $1.85 Million To Resolve False Claims Allegations

United States Attorney Andrew M. Luger today announced that R.J. Zavoral & Sons, Inc., John Zavoral, Peter Zavoral and Craig Pietruszewski have agreed to pay $1.85 million to resolve allegations that they violated the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act by making false statements to the Small Business Administration (SBA) and the U.S. Army Corps of Engineers. The allegations related to the Heartsville Coulee Diversion construction contract for flood control work in and around East Grand Forks, Minnesota, mainly performed between 2004 and 2008.

“Congress created the SBA’s 8(a) program to give meaningful opportunities to deserving disadvantaged small businesses across the country,” said Assistant U.S. Attorney David W. Fuller. “We will continue to work with our agency partners to identify and pursue instances where companies attempt to take advantage of the 8(a) program and others like it.”

According to the allegations, the U.S. Army Corps of Engineers had set aside the contract for the Heartsville construction project for a qualified Section 8(a) business concern under the SBA’s Section 8(a) Business Development Program. For the purpose of qualifying for the contract award, R.J. Zavoral & Sons entered into a joint venture with a qualified Section 8(a) business. The United States alleged that the Defendants 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. The actions of Defendants resulted in harm to the Section 8(a) business concern and caused the United States to pay significant amounts of money to the Joint Venture with little or no benefit to the Section 8(a) Business Development Program.

“The purpose of the 8(a) Program is to promote the business development of eligible 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,” said Melvin F. Williams Jr., SBA’s General Counsel. “This settlement sends a clear message that the United States Attorney’s Office will aggressively pursue allegations of fraud against the SBA Section 8(a) Program, which is so vitally important to the nation’s economy and to the many disadvantaged small businesses that participate in the program. This settlement protects the integrity of this critical program.”

This case is the result of a cooperative investigation conducted by the Small Business Administration, the Department of Defense Office of the Inspector General, and the Defense Contract Audit Agency.

The underlying case is United States v. R.J. Zavoral & Sons, Inc.; John T. Zavoral; Peter M. Zavoral; and Craig A Pietruszewski, Civil No. 12-cv-00668 (MJD/LIB).



Updated April 30, 2015