NASA contractor pays $7.7 million to settle False Claims Act suit alleging fraud on small business contracting program

June 29, 2023

HX5, LLC and its owner and CEO Margarita Howard have agreed to pay $7.76 million to resolve a False Claims Act lawsuit filed by Murphy Anderson client Vantage Systems, Inc. on behalf of the United States alleging that the contractor made materially false statements and omitted material information in mandatory submissions to the United States Government, and fraudulently obtained federal contracts intended for valid participants in the 8(a) Business Development (BD) program.

HX5, a Fort Walton Beach, Florida based company, participated in the Small Business Administration’s (SBA) 8(a) program from 2008 to 2017. The settlement between the United States Government and HX5 states that “After it was admitted to the 8(a) BD Program, Defendants allegedly made materially false statements, or failed to report information they were required to report, to the SBA [Small Business Administration] during mandatory annual reviews. The United States contends that the Defendants did this because providing accurate information would have resulted in HX5’s termination from the SBA 8(a) BD Program. During the reviews, Defendants allegedly failed to report distributions and payments to Ms. Howard’s family members and allegedly provided false information to SBA regarding Ms. Howard’s assets.”

As a result of these false statements and fraudulent omissions, the settlement agreement states, HX5 was allegedly able to fraudulently maintain its 8(a) BD participant status. The agreement alleges that the defendants also falsely certified to NASA, the U.S. Army, and Air Force that it was a valid 8(a) participant, as a result of which HX5 was awarded contracts from each of those agencies.

The 8(a) program is a 9-year business development program created to help federal government contracting firms owned and controlled by socially and economically disadvantaged individuals. In order to participate in the 8(a) program, and thus obtain contracts set aside for 8(a) participants, a firm and its owners must meet economic disadvantage requirements established by SBA regulations, including limits on net worth, income, and total assets.

Vantage Systems is a graduate of the 8(a) BD program and a successful aerospace contractor. Vantage Systems’ qui tam complaint, filed in the United States District Court for the Northern District of Florida, alleged that Ms. Howard acquired several real estate assets and other assets such that her net worth was considerably higher than the limits imposed at the time under the SBA’s 8(a) regulations. The complaint alleged that HX5 and Ms. Howard, together with an affiliated joint venture HX5 Sierra LLC, allegedly made false statements about Ms. Howard’s economic condition in order to obtain two NASA contracts and several Department of Defense subcontracts valued at hundreds of millions of dollars.

Vantage Systems will receive $1.35 million, or 17.5% of the settlement recovery pursuant to the False Claims Act whistleblower reward provisions, as well as statutory attorneys' fees.

Murphy Anderson’s Mark Hanna and Nicolas Mendoza represented Vantage Systems, and Maya Saxena, Joe White, and Adam Warden of Saxena White served as local counsel.

The case was handled for the United States by Assistant U.S. Attorney Mary Ann Couch of the U.S. Attorney’s Office for the Northern District of Florida, and Department of Justice Trial Attorney Laura Hill.

Read the Department of Justice press release.

Read the settlement agreement.

Read Vantage Systems' qui tam complaint.