In short
- The contracts were set aside for small, disadvantaged businesses and service-disabled veteran-owned small businesses, but the defendants knowingly violated program rules.
- Davis agreed to pay $6 million in restitution, while Lauer agreed to pay about $6.45 million.
What happened
Thomas E. Lauer and Rebecca J. Davis admitted to conspiring to fraudulently obtain five contracts worth over $80 million for Elstner Construction Company at Letterkenny Army Depot, and a $5.3 million contract for Bon Secour Management at the VA Medical Center in Salem, Virginia. Both companies falsely claimed eligibility for small business programs, violating SBA rules and contract provisions.
Davis agreed to pay $6 million in restitution for revenue retained from the fraudulent contracts, while Lauer agreed to pay about $6.45 million, including $6 million for the Letterkenny contracts and approximately $459 thousand from the Salem VA Medical Center contract. The case was investigated by multiple federal agencies and prosecuted by the U.S. Attorney’s Office for the Middle District of Pennsylvania.
Davis also admitted to making false and fraudulent submissions to the U.S. Small Business Administration during and in relation to this criminal conduct, including a false 2008 certification that she and her company were in compliance with 8(a) Business Development Program rules relating to “control” and “one-time eligibility.
In numbers
- $80 million value of contracts fraudulently obtained
- $6 million restitution agreed by Davis
- $6.45 million restitution agreed by Lauer
What compliance teams should check
- Review all contracts awarded to Elstner Construction Company under the SBA 8(a) Business Development Program for compliance with 'one-time eligibility' and control rules.
- Scrutinize certifications and contract performance requirements for Bon Secour Management, especially regarding SDVOSB status and the 15 percent cost allocation to employees.
- Cross-check restitution payments of $6 million by Davis and $6.45 million by Lauer against contract proceeds and ensure proper reporting to the U.S. Small Business Administration.
Why it matters
This case highlights the importance of rigorous due diligence and ongoing monitoring of small business program eligibility and contract compliance. Fraudulent certifications and misrepresentations can lead to significant financial losses for government programs and undermine the integrity of set-aside contracting initiatives. Compliance officers must ensure that all program rules, such as 'one-time eligibility' and performance requirements, are strictly followed and that any red flags in certifications or contract performance are promptly investigated and reported.
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