Government Contractor and Executives to Pay $21.3M to Resolve Fraud Scheme Involving Service-Disabled Veteran-Owned Small Business Contracts

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. 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 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.” 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.