A Richland business awarded millions of dollars worth of work at Hanford has paid $235,000 to resolve allegations it served only as a front company to bid for a subcontract.
The Department of Justice reached the settlement with Sage Tec and its owner Laura Shikashio shortly after reaching a settlement agreement with another Hanford subcontractor accused of being involved in the alleged scheme.
Washington Closure Hanford, a former Department of Energy environmental cleanup contractor at the Hanford nuclear reservation, was required by DOE to award some of the work in its contract to small, disadvantaged businesses, such as woman-owned businesses.
Sage Tec, owned by the wife of a former vice president of Federal Engineers & Constructors (FE&C) of Richland, was awarded two subcontracts by Washington Closure as a small, woman-owned business, according to a federal lawsuit.
But most of the work was not done by a small, woman-owned business, but by FE&C, according to the lawsuit.
A month earlier FE&C agreed to pay $2 million to resolve allegations that it used Sage Tec as a front company to win Washington Closure contracts.
“While FE&C believes that it complied in all material respects with the applicable regulations, we are glad to put these costly and complicated legal proceedings behind us so we can focus all of our energies on providing the high-quality construction and remediation work that has been our hallmark since the company was founded in 2001,” said FE&C chief executive Richard French.
While FE&C believes that it complied in all material respects with the applicable regulations, we are glad to put these costly and complicated legal proceedings behind us so we can focus all of our energies on providing the high-quality construction and remediation work that has been our hallmark.
Richard French, FE&C chief executive
Sage Tec, Shikashio and FE&C have admitted no liability in their settlement agreements.
The federal lawsuit was filed in 2010 by Savage Logistics — a small, woman-owned business that was doing Hanford work — alleging, among other complaints, that the subcontracts were improperly awarded to Sage Tec.
In December 2013, the Justice Department joined Savage Logistics in filing a civil lawsuit against Sage Tec, Shikashio, FE&C and Washington Closure, accusing them of violating the False Claims Act.
Under the act, a whistleblower who exposes fraud against the federal government may be eligible to receive a portion of any settlement or recovered money.
Savage Logistics and its owner, Salina Savage, will receive $47,000 of the $235,000 Sage Tec settlement, according to the U.S. Attorney’s Office of the Eastern District of Washington. They also were to receive $470,000 of the previously announced FE&C settlement.
In separate agreements, Sage Tec will pay $45,000 and FE&C will pay $100,000 for Savage’s attorney fees and costs.
Small business fraud not only harms the taxpayers and the vital cleanup mission at Hanford, but also legitimate small, disadvantages businesses that are cheated from the opportunity to fairly compete for and perform DOE subcontracts.
Joseph Harrington, acting U.S. attorney for the Eastern District of Washington
The subcontracting arrangement was intended to deceive the government into believing that a woman-owned small, disadvantaged business was performing valuable work as a government subcontractor, said Hannibal "Mike" Ware, the Small Business Administration acting inspector general, when the Sage Tec and Shikashio settlement was announced Friday.
“Small business fraud not only harms the taxpayers and the vital cleanup mission at Hanford, but also legitimate small, disadvantages businesses that are cheated from the opportunity to fairly compete for and perform DOE subcontracts,” said Joseph Harrington, acting U.S. attorney for Eastern Washington.
Sage Tec had been awarded a $4.5 million subcontract in November 2010 to clean up chromium contamination near Hanford's C Reactor.
However, Sage Tec had no relevant experience, no equipment and no employees other than its owner, according to the legal complaint. All it had to offer was its name and status as a woman-owned small company, federal prosecutors said.
FE&C employees, who stayed on that company’s payroll, performed most of the work, prosecutors said in 2013.
Two years later, Washington Closure awarded Sage Tec a $15 million subcontract for cleanup of contaminated structures, soil and pipelines in the 300 Area just north of Richland, but Sage Tec still had only one employee and no equipment, according to the Department of Justice complaint.