North American Specialty Insurance Company To Pay Over $1 Million To Settle False Claims Allegations

North American Specialty Insurance Company To Pay Over $1 Million To Settle False Claims Allegations For Bonding Contractor In Small Business Administration 8(a) Program Fraud Scheme


CHARLOTTE, N.C. – U.S. Attorney Andrew Murray announced today that New Hampshire-based North American Specialty Insurance Company (NAS IC) has agreed to resolve allegations that the company violated the False Claims Act by bonding a South Carolina general contractor that submitted false claims to the United States for services performed under fraudulently obtained contracts from the U.S. Department of Defense and the U.S. Department of Agriculture. These contracts had been set aside for companies that qualified for the U.S. Small Business Administration’s (SBA) Section 8(a) Business Development Program. NAS IC has agreed to pay $1,040,035.20 to resolve the government’s allegations.

The 8(a) Business Development Program was created to help provide a level playing field for small businesses owned by socially and economically disadvantaged people or entities. A business owned and controlled by socially and economically disadvantaged individuals can apply for certification from the SBA as an 8(a) business. An 8(a) business can obtain certain preferences during the contracting process, and can bid on contracts that the government has set aside for qualified 8(a) businesses. A business can remain in the 8(a) program for up to nine years, but during that time, must provide information to the SBA, which is used to determine continuing program eligibility.

The United States alleges that, among other things, South Carolina general contractor Claro Company, Inc. made materially false, fictitious, and fraudulent statements and representations, or material omissions, to gain entry into and to continue participation in the 8(a) program. The United States also alleges that NAS IC knew or should have known that Claro was not eligible for 8(a) set-asides. Specifically, the United States alleges that NAS IC knew or should have known that Claro Company was in violation of the regulations governing the 8(a) Program and the government’s contracting requirements. Specifically, the United States contends that NAS IC knew or should have known, among other things, that: Claro Company was not controlled by a socially and economically disadvantaged individual, and that it was affiliated with and controlled by another entity and/or individuals that did not meet the SBA’s definition of being socially and economically disadvantaged; that neither the affiliation nor control were disclosed to the SBA; and that Claro Company made material false misrepresentations regarding its financial status to the SBA in order to avoid early graduation from the 8(a) program. The United States contends that NAS IC nonetheless continued to do business with Claro Company, bonding its projects and therefore allowing it to continue to fraudulently bid for contracts under the preferences in the 8(a) program.

“By enabling fraudsters, these companies play a key part in unlawfully usurping government contract opportunities from socially and economically disadvantaged individuals who the 8(a) Program is intended to assist,” said U.S. Attorney Murray. “My office will pursue vigorously bonding companies and other entities that, by turning a blind-eye or willfully ignoring blatant indicia of program fraud or abuse, enable the submission of these false claims and cause harm to the government program.”

Read more: https://www.justice.gov/usao-wdnc/pr/north-american-specialty-insurance-company-tol-pay-over-1-million-settle-false-claims