N.Y. contractors pay $21.3M to settle veteran small business contract fraud claims

Two New York-based electrical contractors and their top executives have agreed to pay $21.3 million to resolve federal False Claims Act allegations that they improperly obtained government contracts reserved for service-disabled veteran-owned small businesses and other eligible small businesses, the Justice Department announced.

Broadway Electric Inc., Cornerstone Contracting Inc., Chief Executive Officer John Oehler and President Christian Blake admitted, acknowledged and accepted responsibility under the settlement agreement for a multi-year scheme in which they used legitimate veteran-owned firms and other qualifying small businesses as pass-through entities to obtain contracts for which Broadway and Cornerstone were not eligible, according to the Justice Department.

Neither Oehler nor Blake is a service-disabled veteran, the Justice Department said. Despite that disqualification, the two men directed a coordinated operation from approximately April 2017 through May 2025 in which Broadway and Cornerstone personnel identified contracting opportunities, prepared and priced bids submitted under the names of qualifying small businesses, and primarily controlled project execution, staffing and financial administration, according to the settlement agreement.

The purported small businesses received fixed payments of roughly one to three percent of total contract value — not tied to the scope of work performed — while the bulk of contract revenue flowed back to Broadway and Cornerstone, according to the settlement. Broadway and Cornerstone employees also used small-business email domains and exercised signature authority in communications with federal agencies on behalf of the fronting firms, the settlement states.

At least one service-disabled veteran-owned small business owner raised compliance concerns during the scheme, but the defendants did not make material changes to the arrangement, according to the settlement agreement.

“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,” First Assistant U.S. Attorney John A. Sarcone III for the Northern District of New York said in a statement.

The settlement resolves claims brought in part by two whistleblowers — an Air Force veteran and an executive at a qualifying veteran-owned firm — who filed suit under the qui tam provisions of the False Claims Act. The pair will receive $3.67 million of the settlement proceeds, the Justice Department said.

The case was investigated by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Northern District of New York, the Department of Veterans Affairs Office of Inspector General, the Defense Criminal Investigative Service, the Department of the Army Criminal Investigation Division, the General Services Administration Office of Inspector General, the Small Business Administration Office of Inspector General, the Small Business Administration Office of General Counsel and the U.S. Postal Inspection Service.