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Shipyard Fined $1M in Coast Guard Scam

Friday, October 31, 2014

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A Florida shipyard and its president will pay a $1 million fine for a scam designed to siphon off federal contracts meant for small businesses run by disabled veterans.

The fine will "resolve allegations" that North Florida Shipyards Inc. and president Matt Self violated the False Claims Act by creating a shell company in order to obtain U.S. Coast Guard contracts that were designated for Service Disabled Veteran Owned Small Businesses (SDVOSBs), the Justice Department announced Wednesday (Oct. 29).

Photos: North Florida Shipyards

North Florida Shipyards and its president admitted creating a pass-through company to obtain contracts intended for companies owned by service-disabled veterans, the government said.

The Jacksonville military contractor provides blasting, coating, repair, maintenance and other services for commercial and government tanker and cargo ships, passenger vessels, tugs, barges, offshore supply vessel and offshore yachts

The company has Navy Master Ship Repair Agreement (MSRA) certification.

Shell Company

Federal authorities say the shipyard created a pass-through company called Ind-Mar "merely as a contracting vehicle" to satisfy a Coast Guard requirement that its ship-repair contractors be operated and managed by service-disabled veterans and perform at least 51 percent of the labor.

In fact, the government said, North Florida "performed all the work and received all the profits."

Had the Coast Guard and Small Business Administration (SBA) known that Ind-Mar was "nothing but a front company," the Coast Guard "would not have awarded it contracts to repair five ships," the Justice Department said.

Whistleblowers, Suspension and Settlement

The settlement resolves allegations originally filed in a lawsuit by Robert Hallstein and Earle Yerger under the  False Claims Act, which allows private whistleblowers to sue on behalf of the government for false claims and to share in any recovery.


NFS has Navy Master Ship Repair Agreement (MSRA) certification and provides blasting, coating, repair, maintenance and other services for commercial and government ships and vessels.

The act also allows the government to intervene and take over the legal action, as it did in this case.

In December 2013, the SBA suspended North Florida, Self, Ind-Mar and three others from all government contracting.

In April 2014, North Florida and Self entered into an administrative agreement with the SBA "in which they admitted to having created and operated Ind-Mar in violation of its Coast Guard contracts and SBA statutes and regulations," the government said.

Under the settlement, Hallstein and Yerger will receive $180,000.

'Driven by Greed'

“This settlement sends a strong message to those driven by greed to fraudulently obtain access to contracting opportunities set-aside for deserving small businesses owned and operated by service disabled veterans,” said Inspector General Peggy E. Gustafson for the SBA.

“We are committed to helping ensure that only eligible service disabled veteran owned small businesses benefit from that SBA program.”



Tagged categories: Abrasive blasting; Enforcement; Government contracts; Laws and litigation; Maintenance coating work; Marine; North America; Program/Project Management; Shipyards; U.S. Navy

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