July 29, 2013 by Jeremy Higbee
Strong Castle: The Dark Side of Government Contracting
Picture Source: FederalTimes.com
It seems that almost every day there is some guy out there trying to dupe the government. But it is not every day that a guy dupes the government while stealing opportunities from service-disabled veterans.
If you didn’t know, small businesses owned by women, minorities, service-disabled veterans, and business in economically disadvantaged neighborhoods, all have federal contracts specifically set aside for their population.
Unfortunately, some business owners do not care if those programs are there to help the disadvantaged, they want money and they want it now and they’ll get it by using loopholes to “qualify” for the set-aside contracts. Thereby, these swindlers take the federal contracts away from those who need them most.
The Committee on Oversight and Government Reform found that there were a series of contracts worth more than $500 million that were awarded to the Strong Castle company on questionable grounds. Strong Castle provides government IT solutions.
On their site, they claim to be small, women and minority-owned business (SWaM), a Service-Disabled, Veteran-Owned Small Business (SDVOSB), and that their central quarters are located in the Chinatown district of Washington, D.C., a certified Historically Underutilized Business Zone (HUBZone). The first claim is true, the second is toes-inside-the-law true, and the third is flat out malarkey.
The main antagonist is the President and Chief Executive Officer of Strong Castle, Braulio Castillo.
Castillo was not receiving normal bid notifications. He was able to acquire the contracts so easily because a close relationship with IRS Deputy Director for IT Acquisition, Greg Roseman. Because of this connection, Castillo was able to learn about upcoming contracts well before his competitors. It wouldn’t seem so fishy if Strong Castle hadn’t won a single government contract until 2012, then suddenly, Strong Castle won over a dozen contracts only from the IRS and grew from a company worth $250,000 to potentially $500 million in just six months.
If that wasn’t suspicious enough, When Castillo purchased the then-small IT company, he received a text from Roseman stating, “Congrats on new company. U will be fortune 500 in no time.”
Strong Castle was able to access and receive so many contracts because the company had “qualified” for the set-aside contracts for service-disabled veteran-owned small businesses (SDVOSBs) and the economically disadvantaged neighborhoods (HUBZones). The company took advantage of “weaknesses in the certification processes” according to the Committee on Oversight and Government Reform.
For example, Castillo opened up an office in the HUBZone of Chinatown in Washington, D.C. and called it his company’s central office while he and his wife (who is also a top executive) worked in a wealthy Virginia suburb. The HUBZone contracting requirements has residency requirements that Castillo was able to subvert by hiring full-time Catholic University students who lived in the HUBZone to work at the faux office. It turned out that the Catholic students did not actually live in Chinatown. The Committee on Oversight says that Castillo told the students that they better move or they will be fired.
According to Strong Castle’s website, they still claim their principal location is in Chinatown, but the Small Business Association has decertified them as a HUBZone small business.
That’s not all, to obtain SDVOSB status, Castillo told the story of a foot injury he suffered in 1984 at the U.S. Military Academy Preparatory School, which he attended for a single school year as a football player. That academic year represents the only connection to military service in Castillo’s life.
When first asked, Castillo said that he got the foot injury playing football, but then later, he said it happened during the one of the prep school’s orientations in the woods. Here’s the real kicker, after Castillo left the academy he played football as a quarterback and linebacker in southern California for several years. It must not have been a very severe foot injury, then.
But now, Castillo says those injuries were “crosses that I bear due to my service to our great country. I would do it again to protect this great country.” These “crosses” that he bears apparently did not burden him for 27 years until just before he started his business. Along with SDVOSB benefits, he gets payments of more than $450 a month from the VA for his disability.
The full-report can be found here.
Of course, Castillo is not the only contractor taking advantage of the system. Administrations everywhere are being asked to be more careful about certifying businesses for set-aside government contract programs. Many contractors have set up straw men veteran business owners to make it SDVOSB certifiable, so the VA has to be increasingly scrutinizing, making it more difficult for the true veteran-owned businesses to receive contracts.
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Full Disclosure: Jeremy Higbee has a special interest in government contracting news because he works with BidSync who offers bid notification to help businesses find and secure government bids. He loves to snowboard in Park City when the powder is just right. When he’s not carving the slopes, he writes about local news, opportunities, and business.