More Corporate Misbehavior: Virginia Company To Pay $16 Million Settlement For Fraud

A Virginia defense contractor, ADS Inc., and its subsidiaries have agreed to pay the United States $16 million to settle allegations that they fraudulently obtained contracts, reported the Associated Press (AP). An unnamed whistleblower brought the lawsuit, and will receive approximately $2.9 million as part of the settlement.

ADS subsidiaries were the key element of the fraud. Allegedly, ADS fraudulently obtained small business contracts by having businesses it controlled misrepresent themselves. Some of them falsely claimed to be owned by disabled veterans, while others claimed to be in the category for socially or economically disadvantaged businesses. None of them revealed their association with ADS.

The Justice Department said the settlement resolves the government’s claims against the company, ADS, closing the matter without making a determination of who might be liable, according to the Washington Post.
Twenty years ago, ADS was “little more than a dive shop” in Virginia Beach called Atlantic Diving Supply, until it won a contract to outfit Navy SEALs with wet suits. Next came “a lucrative contract to supply the military’s search-and-rescue operations,” reported the Post. The company later expanded to sell more types of equipment. Last year, ADS made approximately $1 billion from federal contracts.
Through its network of smaller companies, ADS also allegedly took advantage of federal programs intended to help small businesses learn how to secure government contracts. ADS allegedly concealed its relationship with its affiliated companies and misrepresented their size. One of these companies, also based in Virginia Beach, is military pouch and harness manufacturer London Bridge Trading Co. Separately, that company faces a federal investigation for allegedly manufacturing U.S. military supplies outside the U.S., a violation of federal acquisition policy.
Yet another company, military supplier MJL Enterprises, is alleged to have falsely claimed the contracting status restricted to veterans disabled during their military service.  Two other companies alleged to have falsely claimed to qualify for assistance from the Small Business Administration were SEK Solutions and Karda Systems.
A government contract attorney told the Post that companies competing for such contracts don’t always invest in hiring qualified attorneys to make sure they are compliant with the law. The regulations are complicated. The risk of making mistakes, he said, is “stratospheric.”
Craig Follis has extensive experience in litigation, negotiating and settling suits, and providing legal opinions on liability and insurance coverage. You can reach him at (888) 703-0109 or via email at

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