The national law firm of Baron & Budd today announced it has filed an amended complaint on behalf of whistleblowers who allege that ten private collection agencies have defrauded the U.S. Department of Education (DOE) of tens of millions of dollars. The suit alleges that the companies either created or hired ineligible small business entities to win collections contracts set aside for small businesses by the DOE and to earn additional incentive payments under those contracts. (United States ex rel. PCA Integrity Assocs. LLP v. NCO Fin. Sys. Inc., D.D.C., Case No. 15-750).
Three prime contractor defendants in the case were awarded contracts by the DOE to collect and resolve defaulted student loans. These contracts stipulated that a portion of the work must be subcontracted to small businesses. Rather than hire legitimate small businesses, however, the suit alleges the prime contractors knowingly hired subcontractors that lied about their small business status in order to qualify for the subcontracts and earn work and bonuses to which they were not entitled.
The suit names the following companies for their role in the alleged schemes:
- Pioneer Credit Recovery, Inc. (Pioneer) of Arcade, N.Y.
- Continental Service Group, Inc. (ConServe) of Fairport, N.Y.
- West Corporation (West) of Omaha, Neb.
- Alorica Inc. of Irvine, Calif.
- State Collection Service, Inc., of Beloit, Wis.
- Protocol Financial Service, LLC of Beloit, Wis.
- Bass & Associates, P.C. of Tucson, Ariz.
- Edgewater Consulting Group, LLC of Tucson, Ariz.
- Professional Recovery Consultants, Inc. of Durham, N.C.
- Uniquity Financial of New Braunfels, Texas
The suit alleges that several parties involved willfully and knowingly created false small business entities with the intent to defraud the government. The complaint identifies several alleged sham business owners who did not have any prior experience in the debt collecting industry, as well as purportedly small businesses which shared office space, employees, and executive leadership with large businesses. According to the complaint, all of these factors demonstrate that large businesses received the benefit of subcontracts which should have gone to small businesses. In all, the complaint asserts that the ten business entities collectively defrauded the government of millions of dollars.
The evidence we are presenting in this suit, including emails between company executives, demonstrates that the defendants were clearly involved in the day-to-day operational activities of each others businesses and were therefore active participants in this fraud, said Andrew Miller, shareholder and member of Baron & Budds whistleblower group. The prime contractor defendants willfully ignored that the subcontractors they hired did not actually qualify as small businesses, thus depriving legitimate small businesses of work and opportunities for growth. This is textbook small business fraud, and we intend to hold these organizations responsible for any and all fraudulent behavior.
ABOUT SMALL BUSINESS SET-ASIDE CONTRACTS
In the Small Business Act, Congress created a government-wide goal for contracting with small businesses. This goal is currently set at 23 percent of all federal procurements. Most federal agencies involved in procurements create opportunities called set-asides to meet this goal. These allow small businesses to compete against like-sized contractors for opportunities they might not have when competing against larger companies. Some small businesses qualify for additional programs because of their special ownership or geographic location.
The Small Business Administration (SBA) defines what constitutes a small business within a particular industry. To ensure that large companies do not start new businesses for the sole purpose of getting set-aside contracts, the SBA considers not only the number of employees or revenues of the contracting company, but also of any affiliated companies with common ownership, investment, management, and identical business interests.
ABOUT BARON & BUDD, P.C.
Baron & Budd, P.C. is among the largest and most accomplished plaintiffs law firms in the country. With more than 40-years of experience, Baron & Budd has the expertise and resources to handle complex litigation throughout the United States. As a law firm that takes pride in remaining at the forefront of litigation, Baron & Budd has spearheaded many significant cases for hundreds of entities and thousands of individuals. Since the firm was founded in 1977, Baron & Budd has achieved substantial national acclaim for its work on cutting-edge litigation, trying hundreds of cases to verdict and settling tens of thousands of cases in areas of litigation as diverse as dangerous pharmaceuticals and defective medical devices, asbestos and mesothelioma, environmental contamination, fraudulent banking practices, motor vehicles, employment, and other consumer fraud issues.
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