A federal civil settlement requires two contracting firms and their executives to pay $21.3 million after allegations they used pass-through small businesses, including purported service-disabled veteran-owned firms, to capture set-aside federal contracts.
Two companies agreed to resolve False Claims Act allegations tied to reserved federal contracts, with Broadway Electric Inc. and Cornerstone Contracting Inc. implicated alongside CEO John Oehler and President Christian Blake. The settlement totals $21.3 million and addresses claims that these firms improperly secured work meant for qualifying small businesses. Officials say the alleged scheme involved using purported service-disabled veteran-owned small businesses and other small entities as conduits.
Federal set-asides exist to give eligible small businesses, including service-disabled veteran-owned small businesses, a fair chance at government work. These programs require ownership, control, and real economic benefits to flow to qualifying firms. When those rules are bypassed, the intended benefit to veterans and other small business owners is lost.
“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.”
Investigators say the conduct stretched from about April 2017 through May 2025 and involved coordinated use of purported SDVOSBs and other small-business vehicles as pass-through entities. Neither Oehler nor Blake is a service-disabled veteran, and authorities contend neither qualified to own or control a service-disabled veteran-owned small business. Despite formal set-asides, Broadway and Cornerstone personnel allegedly ran the projects, choosing subcontractors, managing payroll, and handling the finances.
“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.”
According to the settlement, the defendants identified opportunities, prepared and priced bids, and submitted those bids in the names of purported small businesses, using teaming agreements, joint ventures, and mentor-protégé structures. They also arranged bonding, chose subcontractors and personnel, and retained signature authority in communications with federal agencies. At least one SDVOSB owner raised compliance concerns, but investigators say the defendants did not materially change how the arrangements operated.
“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.”
Investigators report the purported small businesses typically received fixed payments, generally around one to three percent of total contract value, not tied to actual work performed. The bulk of contract revenue flowed to Broadway, Cornerstone, and the contractors they selected, while the firms allegedly exercised practical control through company personnel using small-business email domains and signature authority. Those operational facts are central to the government’s claim that the SDVOSBs did not truly control performance or reap commensurate benefits.
“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.
Oehler and Blake were reportedly involved in establishing and directing the disputed arrangements and were aware of the federal control and benefit requirements for SDVOSBs. “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.”
The settlement also resolves qui tam claims brought by two whistleblowers, a U.S. Air Force veteran and an executive with an SDVOSB firm, who will receive $3,674,250 under the agreement. 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.). “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.”
Officials said the outcome was the product of a multiagency investigation involving the Justice Department’s Civil Division and the U.S. Attorney’s Office for the Northern District of New York, with assistance from oversight offices across the VA, DoD, Army, GSA, SBA, and Postal Inspection Service. The matter was investigated and led by trial and prosecuting attorneys in coordination with those inspector general offices. The settlement is presented as part of ongoing efforts to protect set-aside contracting programs and the veterans those programs are meant to help.
