Market Overview

Baron & Budd Files Lawsuit Against Ten Financial Aid Collection Agencies Alleging Widespread Violations of the False Claims Act

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Suit Alleges Defendants Misrepresented Small Business Status to Defraud
the Department of Education of Millions of Dollars in Set-Aside Contracts

The national law firm of Baron
& Budd
today announced it has filed an amended complaint on
behalf of whistleblowers who allege that ten private collection agencies
have defrauded the U.S. Department of Education (DOE) of tens of
millions of dollars. The suit alleges that the companies either created
or hired ineligible small business entities to win collections contracts
set aside for small businesses by the DOE and to earn additional
incentive payments under those contracts. (United States ex rel. PCA
Integrity Assocs. LLP v. NCO Fin. Sys. Inc
., D.D.C., Case No.
15-750).

Three prime contractor defendants in the case were awarded contracts by
the DOE to collect and resolve defaulted student loans. These contracts
stipulated that a portion of the work must be subcontracted to small
businesses. Rather than hire legitimate small businesses, however, the
suit alleges the prime contractors knowingly hired subcontractors that
lied about their small business status in order to qualify for the
subcontracts and earn work and bonuses to which they were not entitled.

The suit names the following companies for their role in the alleged
schemes:

  • Pioneer Credit Recovery, Inc. ("Pioneer") of Arcade, N.Y.
  • Continental Service Group, Inc. ("ConServe") of Fairport, N.Y.
  • West Corporation ("West") of Omaha, Neb.
  • Alorica Inc. of Irvine, Calif.
  • State Collection Service, Inc., of Beloit, Wis.
  • Protocol Financial Service, LLC of Beloit, Wis.
  • Bass & Associates, P.C. of Tucson, Ariz.
  • Edgewater Consulting Group, LLC of Tucson, Ariz.
  • Professional Recovery Consultants, Inc. of Durham, N.C.
  • Uniquity Financial of New Braunfels, Texas

The suit alleges that several parties involved willfully and knowingly
created false small business entities with the intent to defraud the
government. The complaint identifies several alleged sham business
owners who did not have any prior experience in the debt collecting
industry, as well as purportedly small businesses which shared office
space, employees, and executive leadership with large businesses.
According to the complaint, all of these factors demonstrate that large
businesses received the benefit of subcontracts which should have gone
to small businesses. In all, the complaint asserts that the ten business
entities collectively defrauded the government of millions of dollars.

"The evidence we are presenting in this suit, including emails between
company executives, demonstrates that the defendants were clearly
involved in the day-to-day operational activities of each other's
businesses and were therefore active participants in this fraud," said Andrew
Miller
, shareholder and member of Baron & Budd's whistleblower
group. "The prime contractor defendants willfully ignored that the
subcontractors they hired did not actually qualify as small businesses,
thus depriving legitimate small businesses of work and opportunities for
growth. This is textbook small business fraud, and we intend to hold
these organizations responsible for any and all fraudulent behavior."

ABOUT SMALL BUSINESS SET-ASIDE CONTRACTS

In the Small Business Act, Congress created a government-wide goal for
contracting with small businesses. This goal is currently set at 23
percent of all federal procurements. Most federal agencies involved in
procurements create opportunities called "set-asides" to meet this goal.
These allow small businesses to compete against like-sized contractors
for opportunities they might not have when competing against larger
companies. Some small businesses qualify for additional programs because
of their special ownership or geographic location.

The Small Business Administration (SBA) defines what constitutes a
"small business" within a particular industry. To ensure that large
companies do not start new businesses for the sole purpose of getting
set-aside contracts, the SBA considers not only the number of employees
or revenues of the contracting company, but also of any affiliated
companies with common ownership, investment, management, and identical
business interests.

ABOUT BARON & BUDD, P.C.

Baron & Budd, P.C. is among the largest and most accomplished
plaintiffs' law firms in the country. With more than 40-years of
experience, Baron & Budd has the expertise and resources to handle
complex litigation throughout the United States. As a law firm that
takes pride in remaining at the forefront of litigation, Baron & Budd
has spearheaded many significant cases for hundreds of entities and
thousands of individuals. Since the firm was founded in 1977, Baron &
Budd has achieved substantial national acclaim for its work on
cutting-edge litigation, trying hundreds of cases to verdict and
settling tens of thousands of cases in areas of litigation as diverse as
dangerous pharmaceuticals and defective medical devices, asbestos and
mesothelioma, environmental contamination, fraudulent banking practices,
motor vehicles, employment, and other consumer fraud issues.

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