Comply with SCA or Go to Jail!

Companies doing business with US tax payer dollars need to understand the government regulations governing their government contracts. They need to represent themselves correctly and take action to maintain compliance throughout the life of each contract. Company officials who don’t may receive prison sentences and may be required to forfeit millions of dollars. A massive investigation involving Internal Revenue Service-Criminal Investigation, the Employee Benefit Security Administration (EBSA), the Defense Criminal Investigative Service, the Small Business Administration-OIG, and the Air Force Office of Special Investigations uncovered a government contracting fraud scheme involving embezzlement of employee benefits and procurement fraud dating back to 2007.

Specifically, from 2008 to 2012, the contractor’s company officials withheld more than $1.4 million worth of health and welfare benefits due to SCA-covered service employees, and diverted the dollars to multiple shell entities to use for their own personal benefit. From 2007 to 2013, the company official falsely represented the company as service-disabled and veteran-owned businesses to fraudulently win over $30 million in government contracts. For more details on the case, see Volume I of Department of Labor’s OIG Investigations Newsletter here.

Compliance with labor law regulations is more critical than ever to achieve success in government contracting. Many contractors are not concentrating on compliance which may ultimately subject them to pay restitution, debarment from contracting, or even jail terms. This is a reminder that any violation of at least 15 labor laws including Service Contract Act, Fair Labor Standards Act, and Davis Bacon Act within the last three years is required to be disclosed to contracting officers on bids and every six months throughout contract performance as part of the Fair Pay and Safe Work Places Executive Order.

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