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Broadway Electric Inc. (Broadway), Cornerstone Contracting Inc. (Cornerstone), Chief Executive Officer John Oehler, and President Christian Blake agreed to pay $21.3 million to resolve False Claims Act allegations that they improperly obtained federal contracts reserved for service-disabled veteran-owned small businesses and other eligible small businesses.
“Congress intended certain federal contracts to be set aside for small businesses and for service-disabled veterans who sacrificed for this country,” said Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division. “We will hold accountable those who fraudulently obtain, or assist others in fraudulently obtaining, these set-aside contracts.”
“Broadway, Cornerstone, and their executives engaged in a multi-year scheme to exploit federal contracting programs set aside for small businesses owned and controlled by service-disabled veterans,” said First Assistant U.S. Attorney John A. Sarcone III for the Northern District of New York. “When contractors circumvent eligibility rules through misrepresentation and undisclosed control arrangements, they undermine the integrity of federal procurement. These programs are designed to aid our nation’s heroes; it is unfortunate that these defendants sought to exploit the sacrifices our service members have made. My office will continue to aggressively pursue individuals and entities who engage in that conduct.”
Federal contracts may be set aside for small businesses that meet specific eligibility requirements, including those owned, controlled, and operated by service-disabled veterans of the United States military. These service-disabled veteran-owned small businesses (SDVOSBs) are intended to provide contracting opportunities to qualifying veteran entrepreneurs.
The settlement resolves allegations that, from approximately April 2017 through May 2025, the defendants engaged in a coordinated scheme to obtain federal set-aside contracts for which Broadway and Cornerstone were not eligible by using purported SDVOSBs and other small businesses as pass-through entities. Neither Oehler nor Blake is a service-disabled veteran and neither qualified to own or control a service-disabled veteran-owned small business. And although contracts were set aside by law for qualifying small businesses, Broadway and Cornerstone personnel in fact primarily controlled execution, staffing, and financial administration.
“The VA OIG will continue to vigorously pursue unscrupulous government contractors who attempt to profit from programs intended for qualifying service-disabled veteran business owners,” said Special Agent in Charge Gregory Billingsley with the Department of Veterans Affairs Office of Inspector General’s Central Field Office. “We thank the Department of Justice and our law enforcement partners for their joint efforts in this case.”
“The deliberate exploitation of the U.S. Small Business Administration’s (SBA) set-aside program, designed to give service-disabled veteran-owned small businesses a fair opportunity to compete, compromises the contracting process and the warfighters those resources are meant to support,” said Special Agent in Charge Jason J. Sargenski of the Department of Defense Office of Inspector General’s Defense Criminal Investigative Service (DCIS), Southeast Field Office. “When large contractors fraudulently control small business entities to capture contracts they are not entitled to, they divert critical defense resources away from their intended purpose, undermine the competitive process, and betray the veterans these programs exist to serve. DCIS remains steadfast in its commitment to protecting the Department’s resources and preserving the trust that underlies every contracting dollar.”
“The favorable settlement in this case is the product of enhanced efforts by President Trump’s Small Business Administration, working with the Department of Justice and other federal law enforcement partners, to uncover misconduct in SBA’s contracting assistance programs and hold wrongdoers to account,” said SBA General Counsel Wendell Davis.
“This settlement sends a clear message: programs created to help America’s disabled veterans should not be exploited for personal profit. Our veterans earned these opportunities through their service and sacrifice. I want to thank our law enforcement and oversight partners for their continued collaboration and commitment to protecting the integrity of these important programs,” said SBA Inspector General William W. Kirk.
“The GSA Office of Inspector General will aggressively pursue contractors that provide false information to win federal contracts,” said Special Agent in Charge Jeffrey Ryan of the GSA Office of the Inspector General Mid-Atlantic Investigations Division. “We will continue to work with our federal partners to protect the integrity of the federal contracting process.”
“Fraudulent schemes that target programs designed to support our nation’s disabled veterans are an affront to those who served our country,” said Acting Inspector in Charge, Nicholas Bucciarelli, who leads the Chicago Division of the U.S. Postal Inspection Service. “By exploiting these set-aside federal contracts, the defendants stole opportunities from honest, service-disabled veteran business owners. Postal Inspectors, working alongside our federal law enforcement partners, remain fiercely committed to protecting the integrity of government procurement and ensuring that federal funds serve their intended heroes. Today’s action demonstrates no matter how complex the deceptive trail is, we will bring fraudsters to justice.”
According to the settlement agreement, Defendants admit, acknowledge, and accept responsibility for the following conduct: Broadway and Cornerstone identified contracting opportunities and prepared and priced bids submitted in the names of purported small businesses, including through teaming agreements, joint ventures, and mentor-protégé structures. They secured bonding, selected subcontractors and personnel to perform contract work, and primarily controlled project execution and financial administration, including payroll. The purported small businesses received fixed payments, typically approximately one to three percent of total contract value and not tied to the scope of work performed, while the remaining contract revenue flowed to Broadway, Cornerstone, and contractors they selected. Broadway and Cornerstone personnel used small-business email domains and exercised signature authority in communications with federal agencies on behalf of the purported small businesses. At least one SDVOSB owner raised concerns regarding compliance with federal control and participation requirements, but Defendants did not implement material changes to the structure or operation of the arrangements.
Oehler and Blake were directly involved in establishing, maintaining, and directing the arrangements throughout the relevant period. They were informed of federal requirements that SDVOSBs control contract performance and receive commensurate benefits for their work, but did not materially alter the structure or operation of the arrangements they had established and maintained.
The civil settlement includes the resolution of claims brought under the qui tam provisions of the False Claims Act by two whistleblowers, a veteran of the United States Air Force and an executive with an SDVOSB firm. The False Claims Act allows private individuals to file suit on behalf of the United States for false claims and share in any recovery. Under the settlement agreement, the relators will receive $3,674,250. The case is captioned United States ex rel. Welch, et al. v. American First Contracting Inc., et al., No. 3:23-cv-0525 (N.D.N.Y.).
