A court in Washington has handed a 15 months prison sentence to an Indian-American businessman for fraudulently obtaining contracts worth $6 million from a federal program created to help minority-owned small businesses.
Tarsem Singh, 61, of Fairfax, VA, owned a company that benefited from the Small Business Development Program run by the Small Business Administration, but after the company became ineligible for the program, he set up another shell company which he used to obtain over 25 federal contracts valued at $6 million, authorities stated.
In a release by SBA Inspector General Peggy E. Gustafson and Washington federal prosecutor Channing D. Phillips, the actual names of the companies were not disclosed, but were identified only as “A” and “B”. The first company which specialized in building construction and renovation was established by Singh and his wife, and it received contracts legitimately for nine years until January 2009, when the company graduated from the program and became ineligible to obtain such contracts.
Singh immediately set up the fake company in which he made himself the vice president, and in making it appear to meet the SBA eligibility requirements, he continued to receive federal contracts under the program.
The shell company had only one employee and the workers of his original company and sub-contractors did the work that should have been done by the second company’s workers as required by the SBA program, officials said.
The SBA Small Business Development program was established to help “small, disadvantaged businesses compete in the marketplace,” according to the agency.
Firms owned by minorities, women and ex-servicemen have to meet the SBA eligibility standards based on a company’s size and number of employees to get the federal contracts set aside for them, and their workers must perform a certain percentage of the contract work. When they grow to a certain size or meet other standards, the businesses graduate from the program and become ineligible for the federal government contracts issued under the program.
Singh, in trying to avoid these eligibility requirements, set up the shell company and went further to conceal from the SBA that the original company was actually executing the contracts obtained by the shell company.
Among other actions, Singh used magnetic signs of the shell company’s logo to cover the original company’s name on the vehicles used by the fake firm, and he made employees of the original company to use emails created for the shell company so that they appear as its employees when working on the fraud contracts, officials said.
Singh pleaded guilty to the charge in December 2015 and in addition to the prison sentence, he has been ordered to pay $25,000 in fines and about $120,000 in restitution by Washington Federal Judge Reggie Walton.
SBFI offers 50+ training courses to improve commercial lending skills-see catalog here.
Subscribe to AdviceOnLoan–award-winning, weekly newsletter for commercial lenders.