The hallmark of the government’s Service-Disabled Veteran-Owned Small Business programs is ownership and control of the business by a qualifying service-disabled veteran of the U.S. military.  So what happens when you intentionally violate that rule to take advantage of program benefits?  The answer won’t surprise you – and it should serve as a reminder of the powerful enforcement stick the government wields.


Today’s unfortunate example is Hayner Hoyt Corporation – a Syracuse based contractor that agreed to pay in excess of $5 million to resolve allegations that it intentionally exploited the SDVOSB program for contracting opportunities.  Specifically, the government alleged that Hayner Holt officials exerted control over a purported (and now defunct) SDVOSB.  While a service-disabled veteran figurehead was placed at the head of the operation, all of the actual control, day-to-day management, and decision making was in the hands of Hayner Holt and its affiliates.  In reality, the responsibilities of the service-disabled “president” of the SDVOSB included taking inventory and snow removal.

While these allegations may be a blatant example of government contracting fraud, it bears repeating that most government investigations and lawsuits are based on conduct that falls far short of this example.  In fact, in today’s enforcement environment, many allegations of so-called fraud come down to nothing more than failing to know the rules.

For example, again looking at the SDVOSB program, did you know that a service-disabled veteran must obtain written verification that she qualifies for the program?  Failing to obtain that verification could land a contractor operating an SDVOSB in the same kind of trouble as Hayner Hoyt – even without the elaborate scheming.

The only true way to avoid these pitfalls is a robust ethics plan that creates a culture of institutional compliance.  Do you know the current state of your Code of Business Ethics and Conduct?