Photos: Stephanie Hillier / Vimeo still; Eduard Marmet / Flickr; Getty Images;
Illustration: Leslie Garvey / POGO)
“THE PROJECT ON GOVERNMENT OVERSIGHT (POGO)”
“On January 5, the Pentagon’s Defense Logistics Agency (DLA) awarded a contract worth up to $33 billion over 10 years to a privately held equipment supplier called Atlantic Diving Supply, Inc., or ADS.
ADS’s gargantuan new award for work on a Pentagon logistics program landed after the company’s majority owner, Luke M. Hillier, personally agreed to pay $20 million in 2019 to settle civil charges that his company defrauded the same program by falsely claiming to be a small business, among other accusations. “
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“In the months before Hillier’s settlement, three non-ADS executives including a former state politician pleaded guilty in a felony scheme. According to the Justice Department, Hillier—referred to as “Person Y” in court records—allegedly created the scheme to allow ADS to benefit from contracts set aside by law for small businesses owned by socially and economically disadvantaged individuals, often women- and minority-owned ventures. Companies controlled by those non-ADS executives then allegedly would partner with ADS to perform work on the contracts. The arrangement allegedly allowed ADS to benefit even though ADS is mostly owned by Hillier and thus was not eligible to bid on the contracts directly.
Hillier was never criminally charged, though whistleblowers have alleged in a False Claims Act lawsuit that ADS has manipulated the small business contracting system for years. In addition to Hillier’s personal settlement, ADS itself paid $16 million in 2017 to settle civil allegations of small business contracting fraud, including unlawfully obtaining contracts intended for service-disabled veteran-owned small businesses, and bribery. Both settlements came without admissions of wrongdoing by the company or its owner, but the Small Business Administration’s inspector general, Hannibal “Mike” Ware, said in a 2017 Justice Department statement that “the actions of ADS and its affiliated entities deprived legitimate small businesses of valuable federal contracting opportunities.”
ADS’s general counsel Adam Casagrande told POGO that “no ADS employee was indicted or convicted of any crime associated with the broad and lengthy investigation by the Department of Justice” and “ADS was completely exonerated, both civilly and criminally,” even though the company’s civil settlement agreement states that it is not “a concession by the United States that its claims are not well founded.” ADS has maintained that it has “always complied” with Small Business Administration standards and that it settled to put “this matter behind us.”
Read more at POGO on this case study of the government’s struggle to police procurement fraud
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