The Ross Group headquarters, 510 E 2nd St., in Tulsa. CLIFTON ADCOCK/The Frontier

A Tulsa-based construction company has agreed to pay the federal government $2.8 million to settle a lawsuit alleging it set up front companies to fraudulently obtain government construction contracts meant for small disadvantaged businesses.

On Tuesday, the U.S. Department of Justice announced it had reached a settlement with the Tulsa-based Ross Group Construction Corporation, stemming from a 2015 whistleblower lawsuit filed in the federal district court in Oklahoma City that alleged the company set up at least three spin-off companies to fraudulently obtain contracts set aside for small and disadvantaged businesses for construction and renovation at military bases and other government properties in the region.

Though the settlement resolves allegations of fraudulent behavior by the company and its affiliated companies, Ross Group was not required to admit wrongdoing in connection with the claims.

David Thomas, CEO of The Ross Group, declined an interview request from The Frontier, but in a media release issued Wednesday, said the company was “pleased to announce a settlement of civil litigation that does not admit any liability or wrongdoing by the company or any of its employees, officers, directors, or owners and which allows us to continue to serve the public, as we have done for the past forty-one years.”

The Ross Group has been part of numerous high-profile commercial and industrial construction and renovation projects around the state and in Tulsa, including the recent construction of the Vast Bank building at 110 N. Elgin Ave., renovation of the historic Tulsa Club building downtown, the Boxyard in downtown Tulsa, and Eufaula’s Indian Health Center.

The federal civil suit that resulted in the settlement announced Tuesday was originally filed on behalf of the federal government by Southwind Construction Services, a small business eligible to receive federal small business set-aside contracts, in 2015. 

According to that suit, Southwind Construction filed a protest with the federal government in 2012 about PentaCon, alleging the company should not qualify for federal government small business set-aside contracts because it was directly controlled by The Ross Group and exceeded business size limitations. 

Southwind Construction also filed a protest in 2014, when another company controlled by The Ross Group, Red Cedar Enterprises, Inc., began representing itself as a small disadvantaged business and bidding on set-aside contracts, the lawsuit states.

To qualify as a small business for purposes of U.S. Small Business Administration (SBA) programs, companies must meet defined eligibility criteria, including requirements concerning size, ownership, and operational control.  

Records show PentaCon, Red Cedar and C3 were awarded federal small business set-aside construction and renovation contracts for military bases and other federal property in Kansas, Arkansas, Louisiana and Texas, as well as Oklahoma’s Fort Sill, Altus Air Force Base, Tinker Air Force Base and the McAlester Army Ammunition Plant, the lawsuit states. The settlement with the government, however, does not mention Red Cedar.

The three spinoff companies were “completely dependent upon TRG (The Ross Group) for bidding, prosecuting and managing work, oftentimes using the same employees for the same tasks, on numerous solicitations, and have done so for many years,” the lawsuit states. “Defendants are nothing more than front companies utilized by TRG to obtain contracts set aside for legitimate small and other disadvantaged concerns and to illegally obtain payments from the Government.”

According to the suit, the Ross Group would provide all bidding and performance work on contracts awarded to the spinoff companies, as well as all manpower, equipment, bonding and financial resources for the three companies. The companies would then certify to the U.S. Small Business Administration that they qualified for the program.

In addition, PentaCon at one point had told the U.S. Small Business Administration that it would no longer claim to be a small business, but continued to do so anyway, the suit claims.

“Small business set-aside contracts provide opportunities for small businesses to participate in federal contracting and gain valuable experience to help them compete for future economic opportunities,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division.  “We will pursue those who knowingly obtain set-aside contracts to which they are not entitled and thereby prevent deserving small businesses from receiving the assistance that Congress intended.”

The U.S. Department of Justice alleged that Ross Group maintained operational control over the day-to-day and long-term management decisions of the two purported small businesses, including controlling their financial affairs and business operations. As a result, neither PentaCon nor C3 satisfied the size and eligibility requirements to participate in the set-aside programs.  Ross Group, PentaCon, and C3 allegedly concealed their affiliation from the United States and knowingly misrepresented the eligibility of PentaCon and C3 for the set-aside contracts, according to the Justice Department’s media release.

“It is critical that we protect the integrity of federal government contract programs so that taxpayer money goes only to those who legitimately qualify for assistance,” said Timothy J. Downing, U.S. Attorney for the Western District of Oklahoma.  “We will continue to hold accountable those who make false statements to take unfair advantage of programs for which they would not otherwise qualify, because it deprives legitimate applicants from obtaining these necessary benefits.  I want to specifically thank the Defense Criminal Investigative Service for their outstanding and thorough investigative work in this case.”

The settlement is the result of a coordinated effort among the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Western District of Oklahoma, DCIS, the Inspector General Offices of the SBA, General Services Administration, and the Department of Veterans Affairs, and the Army Criminal Investigation Division Major Procurement Fraud Unit.

As part of the settlement, Southwind Construction will receive $520,000 from the $2.8 million, since the settlement was spurred by the lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery.

In its statement to The Frontier, Ross Group said it has cooperated full with the government in reaching the settlement.

“Ross Group strives to fully comply with all ethical rules, regulations, and laws and continuously seeks to improve our training and compliance procedures,” the statement read. “We are most proud of our work mentoring small businesses and have recently been approved by the government to mentor two small businesses interested in seeking Federal opportunities. We instill in our mentees the same philosophy Ross Group has followed since its founding, with a focus on the highest ethics, superior quality, and exceeding expectations on every project.”