Settlement Indicates Widespread Abuse of SBA Preference Programs


Last month, the U.S. Department of Justice settled a case with a Maryland company that shows, yet again, how common it is for companies to abuse the preference programs that the Small Business Administration runs.

In this case, it was the SBA’s Historically Underutilized Business Zone (HUBZone) program that was the target. Beltsville, Md.-based CSI Engineering and CSI Design Build – along with their president, Debdas Ghosal –agreed to pay the government $200,000 to settle claims that they used false statements to obtain government contracts set aside for HUBZones.

The HUBZone program was established in 1997 to encourage businesses to locate in economically depressed areas. The program provides some priority in government contracts to companies that have their main offices in economically depressed areas and that draw at least 35 percent of their workforce from those designated areas.

But, according to the Justice Department, CSI Design Build falsely told the government that its principal office was located in a designated HUBZone. Actually, CSI Design Build operated as a part of CSI Engineering, which is not located in a HUBZone. Based on its false representations, the company won contracts with the Army, the Department of Labor, the Department of Homeland Security and the Smithsonian Institution.

The CSI companies’ manipulation of the program in order to win lucrative government contracts set aside for HUBZone businesses is representative of historical and widespread problems with the program — and with the SBA’s oversight.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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