Before FBI Raid, Dawson hit with Whistleblower Lawsuit
by Andrew Walden
With federal agents swooping down onto the Virginia offices of Chris Dawson’s ‘Hawaiian Native Corporation’ last June, Hawaii media were unanimous in expressing complete confusion about how or why the prominent, politically influential ‘8-a’ corporation and its numerous ‘Dawson’ subsidiaries could possibly be targeted.
Dawson is a major financial backer of Council for Native Hawaiian Advancement. With CNHA frontrunning, 8-a companies, including Dawson, scooped up multi-million dollar no-bid Lahaina ‘cleanup’ contracts just weeks after the FBI raid.
What is the FBI looking for? A quick search on PACER reveals a ‘qui tam’ whistleblower suit filed by former Dawson executive, Eugene Sellers.
Under the Federal False Claims Act ‘qui tam’ lawsuits allow private citizens with specific insider knowledge of fraud against the Federal government to initiate legal action to recover fraudsters ill-gotten gains.
Filed under seal December 19, 2018 and unsealed in August, 2019, Sellers’ case was settled out of court July 24, 2020, “without prejudice as to the United States.”
Here are some excerpts from the complaint:
29. Dawson Group Defendants officers and employees own a series of companies which they utilize to submit invoices as vendors or subcontractors of the Dawson Group Defendants to circumvent the SBA 8(a) Program regulations, Federal Acquisition Regulations (FAR), and Defense Federal Acquisition Regulations (DFAR) and other laws and regulations.
V. GENERAL ALLEGATIONS
30. The Defendants conspired to violate the FCA and violated the FCA by
making, using and presenting materially false and fraudulent certifications to the United States:
a. To acquire certification as SBA 8(a) small and disadvantaged business and NHO
b. To acquire CAGE Codes from the Government Services Administration
(GSA) for use in bidding on federal contracts;
c. To be awarded classified contracts and be given access to International
Traffic in Arms Regulations (ITAR) and Export Administration Regulations
(EAR) controlled information; and
d. To be awarded contracts by the United States.
31. The Defendants conspired to violate the FCA and violated the FCA by
making, using and presenting materially false and fraudulent records and claims to the United States for payment.
32. Officers and employees of the Dawson Group Defendants own
companies that invoice the Dawson Group Defendants for work performed as vendors or subcontractors to circumvent the SBA 8(a) Program regulations, Federal Acquisition Regulations (FAR), and Defense Federal Acquisition Regulations (DFAR).
33. Dawson Group Defendants have engaged in cost and labor mischarging
and time card fraud by improperly charging time and material expenses to the United States under various contracts to circumvent the FAR, DF AR and SBA 8(a) regulations.
34. Dawson Group Defendants have transferred money and assets to
companies owned by Dawson Group Defendant's officers and employees and paid them for "phantom" services that were not performed.
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VI. Specific Allegations
A. FALSE CERTIFICATIONS
1. The Dawson Group Defendants. Conspired to violate the FCA and repeatedly violated the FCA By Making, Using and Presenting Materially False Claims and Records to the United States to Acquire Certification as SBA 8(a) Small and Disadvantaged Businesses and a Native Hawaiian Organization
…
69. SBA rules constrain the management of NHOs. A native can manage all
the companies s/he wants. A non-native manager cannot manage more than two (2) 8(a) NHO business concerns. Yet, Billy Cress, a non-native, was always the manager of the Dawson Group Defendant companies. Brian Hara is the Chief Financial Officer across all Dawson Group Defendant companies. Both are non-Hawaiian natives and thus should be limited to two (2) positions. The business structure and management are a part of the SBA representations and certifications (aka: Reps & Certs) process ensuring the company doesn't have a non-native manager controlling more than one company.
70. Dawna Smith the Secretary and officer of the Hawaii Native Corporation Board of Directors and knowingly provided the false and misleading representations and certifications regarding native management and control to the SBA and to GSA for the Dawson Group Defendants and other defendant companies. Ms. Smith was also the Director, Human Resources for each company.
71. The Dawson Group Defendants, their officers and employees abused
their SBA 8(a) status and conspired to circumvent the rules established for SBA 8(a) qualified entities and filed false, material statements with the United States.
72. The Dawson Group Defendants have been awarded millions of dollars of contracts with the Department of Defense and other federal agencies. In its submission of bids for these contracts the Dawson Group Defendants falsely represented that each particular subsidiary qualifies as a SBA 8(a) business. They also falsely certified to the government that the particular SBA 8(a) business entity will perform the contract and is in compliance with laws requiring it to perform at least 51% of the work. Each submission contained a "Program Management" section describing the organization structure with Billy Cress, a non-Native Hawaiian, as the President of each company, Dawna Smith, a non-Native Hawaiian, as the Director of Human Resources, and other Dawson Group Defendant managers who were also non-Native Hawaiians holding the same key personnel roles in each of the companies. Essentially, they kept the same organizational chart changing only the name of the company.
73. Once awarded these government contracts, the Dawson Group Defendants presented claims for payment to the United States based on the same representations and certifications regarding the SBA SDB entity that performed the work.
74. Certain employees of the Dawson Group Defendants resigned from their positions when compelled by their employer to make false statements and representations to the United States.
75. Officers and employees of the Dawson Group Defendants are compensating themselves through multiple SBA 8(a) contracts simultaneously by taking "excessive withdrawals" in violation of 13 CFR 124.112(d) and misrepresenting this information in certifications to the United States.
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77. An example of Defendant Dawson Group's efforts to circumvent the excessive withdrawals regulations involved a contract awarded on by the Air Force to Dawson Enterprises in December of2016. Specifically, a $21,357,584 contract, FA2823-17-C-4010, for construction of modular buildings at Eglin Air Force Base, Florida, to be complete by August 31, 2017. This award was the result of a sole- source acquisition which was received based on the Dawson Group Defendants certification in the 8(a) Program.
78. Bobby and Elodia Miller are the principal officers for Defendant Program and Construction Management, LLC and Dawson Group Defendant employees. Neither are native Hawaiians. Program and Construction Management principle owners are Jeff Bleke, Wes Lane and Billy Cress who are all Dawson Group Defendants employees and are not native Hawaiian. Billy Cress is the President of the Dawson Group Defendants and is not a native Hawaiian.
79. After the award of the Air Force contract FA2823-17-C-4010, Billy Cress directed Elodia Miller to cause Program and Construction Management to invoice Dawson Enterprises $100,000 for undisclosed work. She complied. In January 2017, Program and Construction Management was paid $100,000. Billy Cress then directed Elodia Miller to provide him a check from Defendant Program and Construction Management written to Billy Cress for $100,000.
80. This allowed Billy Cress to receive excessive compensation in violation of SBA and NHO Program regulations without it being reflected in possible audits of the Dawson Group Defendants.
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iii. The Dawson Group Defendants conspired to violate the FCA and have repeatedly violated the FCA by making false and fraudulent certifications to be awarded classified contracts and have allowed access to International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR) controlled information to foreign nationals in violation of United States laws and their contractual certifications
…
87. Because of his security clearance and background in intelligence, the Relator (ie Plaintiff) was hired by the Dawson Group Defendants to help secure contracts with federal intelligence agencies such as the Central Intelligence Agency (CIA), the Defense Intelligence Agency (DIA), the National Security Agency (NSA), the United States Department of Defense, and the Federal Bureau of Investigation (FBI). By the time he resigned, Relator had secured contracts valued at $40.5 million annually and $106, 435,112 over the life of the contract. See Exhibit A.
88. Of the contracts Relator had a role in securing, seven (7) had a security clearance of Top Secret; 11 had a security clearance of Secret; one (1) was Confidential and three (3) were unclassified. See Exhibit A.
89. The Dawson Group Defendants certify on each one of their "cleared" or U.S. contracts that there is no Foreign Ownership or Controlling Interests. The Controlling Interests specifically addresses management and leadership of the company.
90. Shail Jondhale, the Dawson Group Defendants Director of Accounting, is not a U.S. citizen. He is a citizen of lndia. Johndale sees every contract awarded to the Dawson Group Defendants including classified information He is identified as the POC for every Dawson company registration in www.SAM.gov. The System for Award Management is a government run site for contractor registration.
91. Lyon (a/k/a Leon) De Souza, the Dawson Group Defendants Director for Strategic Planning is not a U.S. citizen. He is a dual Canadian and South African citizen. He is the point of contact for Dawson Federal. DeSouza lives in San Diego. He has a Department of Defense Common Access Card (CAC) to access military installations and government facilities in San Diego including the Navy Base, the Naval Air Station and the SPA WAR facilities. He also used his CAC to enter the U.S Army Corps of Engineers facility in Los Angeles, CA.
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B. COST MISCHARGING
i. Dawson Group Defendants fraudulently transferred money and assets to companies owned by Dawson Group Defendant's officers and employees and/or paid them for "phantom" services that were not performed
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108. The Dawson Group Defendants purposely charged costs that were not allowed by the contracts misclassifying them as allowable costs. Dawson Group Defendants annually procure season tickets to Dallas Cowboy football games and parking passes which are only provided to Dawson Group Defendant officers and are not part of an employee recognition program. These costs are "charged" as Other Direct Costs to various projects. They also procure season court side tickets to San Antonio Spurs basketball games for officers and are not part of an employee recognition program. These costs are also "charged" as Other Direct Costs to various projects.
109. The Dawson Group Defendants engaged in a cost mischarging scheme where they intentionally shifted costed and expenses between different contracts. Starting in 2016, Dawson Group Defendants began a program called "Inter Company Transfers" moving funds from one Dawson Group Defendant company to another unrelated to the actual contract or direct costs. In 2016, Dawson Technical, LLC graduated from the 8(a) program. The "Inter Company Transfers" were a means to move funds from active 8(a) companies to Dawson Technical in efforts to circumvent the 8(a) excessive withdrawal provisions. These transfers were structured to be payments on unspecific subcontracts between Dawson Technical and the Dawson Group Defendant company actively participating in the 8(a) program.
110. As an example of this fraudulent cost mischarging, in October of 2013, Defendant Dawson Federal was awarded a contract for Grounds Maintenance and snow removal at the Air Force Academy in Colorado Springs, CO, Contract# FA7000- 14-D-0001 valued at $2,098,532 a year. Dawson Federal has been awarded this contract each year through October 30, 2018.
111. Dawson Federal purchased the equipment needed to perform this contract such as lawn mowers, snow blowers, trucks, etc. from the previous contractor that had been awarded this contract.
112. From November 2013 through October 2018, Defendant Wagon Wheel, which was owned and operating by officers and employees of Dawson Group Defendants, invoiced Dawson Federal for $7,000 per month to lease the equipment already owned by Dawson Federal. This is a Time and Materials contract, so the Wagon Wheel invoices were used to create Dawson Federal's fraudulent monthly invoice to the Air Force.
113. The Dawson Group Defendants also fraudulently invoiced the United States for "phantom" or non-existent good and services. As an example of this fraudulent phantom cost mischarging, on December 5, 2016, the Air Force awarded Dawson Enterprises LLC a $21,357,584 FFP contract FA2823-17-C-4010 for construction of modular buildings at Eglin Air Force Base, Florida, to be complete by Aug. 31, 2017. This award was the result of a sole-source acquisition received by virtue of the companies 8(a) status.
114. Dawson Enterprises subcontracted with Defendant BD Solutions for consulting work on the Air Force contract FA2823-17-C-4010. Bobby Miller and Dwayne Sellers are principal officers for Defendant BD Solutions and active Dawson Group Defendant employees. Neither are native Hawaiians.
115. Bobby Miller and Elodia Miller are the principal officers of Defendant Program and Construction Management, LLC and Dawson Group Defendant employees. Jeff Bleke, Wes Lane and Billy Cress are principle owners of Defendant Program and Construction Management and Billy Cress was the President of the Dawson Group Defendants; Wes Lane is a General Manager and Officer of Dawson Group Defendants; and, Jeff Bleke is an employee of Dawson Group Defendants. None are native Hawaiians.
116. After the award of the Air Force contract FA2823-17-C-4010, Billy Cress directed Elodia Miller to have Program and Construction Management to invoice Dawson Enterprises $100,000 for undisclosed "phantom" work. She complied. As noted in paragraph 79 above, in January 2017, Program Construction Management was paid $100,000. Billy Cress then directed Elodia Miller to provide him a check for $100,000.
ii. Officers and employees of the Dawson Group Defendants own companies that fraudulently invoice Dawson Group companies for work performed as vendors or subcontractors to circumvent the SBA 8(a) Program regulations, Federal Acquisition Regulations (FAR), and Defense Federal Acquisition Regulations (DFAR).
117. An example of false invoicing and cost mischarging by officers and employees of the Dawson Group Defendants that own companies that fraudulently invoice Dawson Group companies for work performed as vendors or subcontractors also involved Air Force Contract FA2823-17-C-4010. Defendant Sandlot Ventures, is a company owned and operated by officers and employees of Dawson Group Defendants, Jeffrey Bleke, Wes Lane, and Billy Cress. Sandlot purchased furniture using Dawson Group Defendant funds for just over $200K. Sandlot Ventures then added $100K for shipping and handling and invoiced Dawson Group Defendants. The Dawson Group Defendants used that invoice to bill the Air Force $306K on contract FA2823-17-C-4010.
118. Another example of false invoicing and cost mischarging by officers and employees of the Dawson Group Defendants that own companies that invoice Dawson Group companies for work performed as vendors or subcontractors involved Defendant Total Reliant Consulting (TRC). TRC is owned by Frank Gilbert, Ronald Dryburgh and Dwayne Sellers. Mr. Sellers is an officer and employee of Dawson Group Defendants.
119. In June 2015, Dawson Federal was awarded the Nuclear Munitions Command and Control (NMC2) Data Management Services (DMS) contract FA9401-15-C-0006 at Kirtland Air Force Base in Albuquerque, New Mexico for $698,793.16 per year. Dwayne Sellers salary was paid by Dawson Federal for his work on the NMC2 contract. Mr. Sellers is also a principle owner of TRC and received proceeds from that contract. That contract is the only source of revenue for TRC.
120. In 2015, Mr. Gilbert and Mr. Dryburgh were full-time employees of Booz Allen Hamilton (BAH). They were able to convince the Air Force to separate their small effort from the larger BAH contract which the Air Force did. That effort was developed into the NMC2 contract that was a directed, sole source award to Dawson Group Defendants. TRC was subsequently created and provided the subcontract by Dwayne Sellers who was the Director of Contracts for the Dawson Group Defendants. Mr. Gilbert, Dryburgh and Sellers are the principle owners of TRC. All three (3) were Dawson Group Defendant employees and none were native Hawaiians. When Dawson Group Defendants received the contract, TRC was able to bill work done by Dawson Group Defendants on the contract as work performed by the subcontractor, TRC.
iii. Unexplained $500,000 Disbursement to Wagon Wheel, a Defunct Company
121. In June 2018, Dawson Federal, an SBA 8(a) company dispersed exactly $500,000 in an undisclosed transaction to Wagon Wheel.
122. Relator saw this unexplained disbursement in June 2018, Dawson Group Defendants held a program managers training titled, "PM 101". The instructors provided detailed training on JAMIS the Enterprise Resource Planning and DCAA compliant software the companies use. One of the functions discussed was Accounts Payable. The instructor put up a spreadsheet on the screen which displayed all of the Accounts Payable which included a $500,000 payment to Wagon Wheel, a defunct company. In 2013, Wagon Wheel (a Texas Company) voluntarily discontinued operations.
123. Wagon Wheel was a venture started by Chris Dawson, the CEO of the Dawson Group Defendants, Billy Cress, the President of the Dawson Group Defendants, and Bryan Hara, the Hawaiian Native Corporation Treasurer and former Chief Financial Officer for the Dawson Group Defendants….
READ: Full Complaint
BACKGROUND: