SBA moves to ban MicroTechnologies LLC from government contracting work
(c) 2013, The Washington Post.
WASHINGTON — The Small Business Administration is moving to ban one of the government's most prominent small-business contractors from new federal work, saying that the firm provided false information about its ownership and operations, documents show.
The SBA said it has information showing that Tysons Corner, Va.-based MicroTechnologies LLC and its founder, Anthony Jimenez, submitted "false and misleading statements" in order to receive preferential treatment, according to a Dec. 20 letter from the agency to the company. The company and Jimenez are effectively suspended from receiving new government work.
The agency said the false statements included one that "appears to be a complete fabrication" to hide the extensive role of two investors who apparently worked with Jimenez to launch, bankroll and operate MicroTech, according to a copy of the letter obtained by The Washington Post.
The SBA notice is the first step in a civil process that could lead to the banning of both Jimenez and MicroTech "from future contracting with any agencies of the Executive Branch of the United States Government," the SBA said.
MicroTech did not respond to repeated requests for comment.
The company has 30 days to respond to the claims in the SBA's regulatory action, which immediately makes the company and Jimenez ineligible for contracting work or any government assistance, such as loans, and proposes the "debarment" of the firm from future federal contracts.
The SBA's enforcement action follows Post stories that examined how MicroTech was able to receive more than $1 billion in federal contracts over nine years and still claim to meet SBA requirements for small and disadvantaged businesses.
The Post stories showed that Jimenez has made claims that appeared to be inconsistent with internal company documents, government records, and interviews with current and former employees.
The stories also detailed how the Department of Veterans Affairs took credit for awarding hundreds of millions in work to MicroTech when more than 90 percent of the money went to large companies.
The Post's reporting has spurred other oversight activity. Inspectors general offices at the SBA and the General Services Administrations have initiated investigations. The Small Business Committee in the House and the House Veterans Affairs Committee have begun examining the VA contracts with MicroTech.
MicroTech has been acclaimed as one of the fastest-growing small federal contractors in recent memory. The firm has received $1.4 billion in federal technology work since it was formed in 2004, a third of it through contracts reserved for small firms owned by service-disabled veterans and disadvantaged entrepreneurs, records show.
A trade magazine declared MicroTech the top small disadvantaged contractor in the country last year. By the end of 2012, MicroTech had almost 400 employees.
Jimenez is a retired Army lieutenant colonel and contracting specialist. In statements to The Post earlier this year, he and his partners said they had followed all federal contracting rules.
"MicroTech has not broken any laws and has conducted itself in an ethical manner," MicroTech said in a statement earlier this year. "For nearly a decade MicroTech has employed hundreds of men and women, contributed to our communities, created hundreds of jobs, and built a successful business which provides quality services to the United States Government as well as our commercial customers."
In 2005, when applying for entrance into the SBA's 8(a) program for small disadvantaged firms, Jimenez said there was "no link, relationship, or partnership of any kind" between MicroTech and MicroLink, a company owned by his two non-disadvantaged investors.
In the Dec. 20 letter, the SBA said: "This statement appears to be a complete fabrication."
False statements for the purposes of getting access to federal set-aside contracts carry civil and criminal penalties.
The SBA said that MicroTech and MicroLink were extensively involved with one another, and that MicroTech paid more than $1.5 million to MicroLink for "subcontractor, commissions, accounting, and consulting expenses," according to the letter.
The agency also questioned MicroTech's size claims to the federal government. Until the fall of 2011, MicroTech claimed to be eligible for contracts reserved for firms with annual revenues of $25 million or less.
The SBA letter said that the "record also shows that MicroTech may not have been a small business concern for many of the contracts it was awarded between 2005 and 2010 due to the affiliation between MicroTech and MicroLink. The record shows a deep and thorough connection between the two firms, its management and its owners."
The SBA noted that Jimenez and his two investors also created a third company, GovWare LLC, that sought out small business contracts with the government.
In his 8(a) application, Jimenez certified to the SBA that he was only a passive investor in GovWare. But at the time, Jimenez had an option to buy back control of the company at any time of his choosing for $860.
He and his two partners took control of GovWare in 2007 and folded its assets into MicroTech, including a set aside contract that eventually yielded more than $200 million in work orders.
The SBA questioned how Jimenez could claim to be a passive investor. "It appears that the answer is that Mr. Jimenez and MicroTech purposefully misled SBA about the relationship in 2005 and also withheld corporate documents from SBA," the Dec. 20 letter said.
Jimenez told The Post that MicroTech made all required disclosures to the SBA and followed all the government rules governing company ownership.
But in its letter, the SBA said "That Option Agreement was never disclosed," as is required by the 8(a) rules.
SBA requires owners of 8(a) firms to work full-time for the applicant firm and to operate independently of other firms. The rules are aimed at preventing larger companies from using small, disadvantaged firms as fronts to get preferential treatment.
"The existence of options is extremely important to SBA in evaluating ownership and control, as well as in determining affiliation for size purposes," the letter said.