A major False Claims Act (FCA) qui tam case is heading to trial that pits a large defense department contractor, OST, Inc., and its sole owner, Vijay Narula, against a lone whistleblower, Andrew Scollick. Scollick blew the whistle to the government alleging that $7 million in construction contracts that were supposed to be awarded to Service-Disabled Veteran-Owned Small Business (SDVOSB) instead went to a newly formed construction company controlled by Narula. Under the FCA, defendants are subject to treble damages (in this case, three times the value of contracts that were awarded). The government may also disbar a company found guilty of a FCA violation, meaning that OST could be barred from obtaining additional government contracts for a period of up to three years.
On July 29, 2022, in Scollick v. Narula, et al., Case No, 1:14-cv-01339-RCL, the United States District Court for the District of Columbia unsealed its legal opinion denying Narula’s and OST’s motions for summary judgment. This ruling clears the way for the case to go to a jury. An earlier ruling in the case garnered much attention because it established for the first time that construction bonding companies could be held liable for defrauding the government if they had reason to know the entity they were bonding was not actually majority-owned and controlled by a service-disabled veteran. While the latest ruling dismissed the bonding defendants because they claimed to lack actual knowledge of the SDVOSB legal requirements, the case law establishes that bonding companies with reason to know the requirements (i.e., the whistleblower tells the bonding company that the requirements are not being met), then FCA liability attaches.
“Plain and simple, it’s a victory for the whistleblower. The ruling expands protections for the service-disabled community,” asserts Michael Kohn, founding partner of qui tam law firm Kohn, Kohn & Colapinto, who represents Scollick. “My father was a highly decorated disabled veteran,” Kohn added.
While OST is a high-tech firm, the alleged fraud scheme outlined the qui tam complaint was simple – find a service-disabled veteran willing to claim on paper majority ownership of a newly formed entity and use that entity to bid on service-disabled set-aside contracts.
The presiding district court judge, Royce C. Lamberth, denied Narula’s and OST’s motion for summary judgment, observing that contemporaneous email messages contradicted Narula and OST’s self-serving denials. For example, the district court pointed to one email exchange where, the disabled veteran used to promote the scheme emailed OST’s chief operating officer complaining how Narula told him “Who my new partners were” and how he had “been intentionally cut out” and “blindfolded.”