On June 9, 2026, the U.S. Department of Justice announced that Broadway Electric Inc., Cornerstone Contracting Inc., and executives John Oehler and Christian Blake have agreed to pay $21.3 million to resolve allegations under the False Claims Act involving the misuse of federal set-aside contracting programs. The settlement resolves claims that the parties orchestrated a multi-year scheme to obtain contracts reserved for service-disabled veteran-owned small businesses (SDVOSBs) and other qualifying small business concerns through pass-through arrangements.
According to DOJ, the conduct spanned from approximately April 2017 through May 2025. During that period, Broadway and Cornerstone are alleged to have used qualifying small businesses as nominal contract holders while exercising actual control over bidding, execution, and project finances. The qualifying firms reportedly received only one to three percent of contract value as fixed fees, while the larger entities directed the substantive work and retained the economic benefit of contracts that were, by their terms, reserved for genuinely eligible small business participants.
The settlement is a notable reminder that DOJ continues to prioritize enforcement against set-aside fraud, and that liability is not limited to the larger contractor benefiting from the arrangement. Both prime contractors and the qualifying small businesses lending their eligibility may face significant FCA exposure when certified status, control, and actual performance diverge. The size of the recovery, the duration of the alleged conduct, and the inclusion of individual executives as settling parties all reinforce that DOJ is prepared to pursue corporate and personal accountability in these matters.
Federal contractors participating in SDVOSB, 8(a), HUBZone, WOSB, or other small business programs should review their teaming, mentor-protégé, joint venture, and subcontracting arrangements to confirm that the qualifying entity exercises the control and performs the work required by the applicable regulations. Compliance reviews should examine how bids are prepared, who manages day-to-day operations, how revenue is allocated, and whether certifications accurately reflect operational reality. Documented policies, training, and internal audits can meaningfully reduce risk in this environment.
This alert is provided for general informational purposes only and is not legal advice. Clients facing questions about set-aside eligibility, contracting compliance, or potential FCA exposure should seek tailored counsel regarding their specific circumstances.