DOJ: sham veteran-owned firms kept 1-3% of federal contracts
Summary
A Justice Department settlement made public June 9, 2026 unwinds an eight-year scheme in which two federal contractors, Broadway Electric and Cornerstone Contracting, used purported service-disabled-veteran-owned small businesses (SDVOSBs) as pass-throughs to win contracts Congress set aside for firms that qualifying veterans actually own and control. Neither Broadway's CEO nor Cornerstone's president is a service-disabled veteran; the shell firms they used collected 1 to 3 percent of each contract's value while Broadway and Cornerstone ran the work, controlled the payroll, and kept the rest. The program this fed off is not small: the Small Business Administration says SDVOSBs took in $32.5 billion in prime federal contracts in fiscal 2025 alone, clearing the government's 5 percent goal. DOJ recovered $21.3 million; two whistleblowers -- an Air Force veteran and an SDVOSB executive -- split $3.67 million of it. One of the veteran owners caught up in the arrangement had flagged compliance concerns internally, and nothing changed.
How the pass-through worked
Per the settlement agreement's own admitted-conduct section⧉, Broadway and Cornerstone identified the contracting opportunities, prepared and priced the bids -- submitted in the purported SDVOSBs' names, through teaming agreements, joint ventures and mentor-protégé structures -- secured the bonding, and picked the subcontractors and personnel who did the work. They controlled execution and financial administration, including payroll. Their staff used the small businesses' own email domains and signed correspondence with federal agencies on the small businesses' behalf.
In exchange, the purported SDVOSBs got a fixed cut: typically 1 to 3 percent of total contract value, unrelated to how much work they actually performed. The rest -- by definition the other 97 to 99 percent -- flowed to Broadway, Cornerstone and the subcontractors those two firms chose.
View data as table
| Total settlement | 21.3 |
|---|---|
| Whistleblower share | 3.7 |
The rule the fronts were built to dodge
's SDVOSB program exists because Congress wants a documented share of federal spending controlled by veterans who were injured serving: certification requires that no less than 51 percent of a firm be owned and controlled by one or more veterans the VA has rated as service-disabled⧉, and the government targets at least 5 percent of all federal contracting dollars for those firms every year. Congress tightened enforcement of that standard in the National Defense Authorization Act of 2024, which required every veteran-owned firm to hold SBA's own VetCert certification -- not the VA's, and not self-certification -- for subcontracting and goal-counting purposes by December 22, 2024⧉.
The program the scheme exploited is, by 's own count, a large and functioning one: SDVOSBs collected $32.5 billion in prime federal contracts in fiscal 2025, over the 5 percent target⧉ -- a scale the pass-through arrangement fed off without meeting the ownership-and-control rule that program is built on.
The warning that went nowhere, and the two who didn't stay quiet
DOJ's account of the admitted conduct⧉ says at least one SDVOSB owner inside the arrangement raised concerns about federal control-and-participation requirements -- and that Broadway and Cornerstone's executives, informed that SDVOSBs must control contract performance and receive commensurate benefits, made no material change to how the arrangements ran.
The case that ended it, United States ex rel. Welch, et al. v. American First Contracting Inc., et al., No. 3:23-cv-0525 (N.D.N.Y.)⧉, came instead from two whistleblowers who sued under the False Claims Act's qui tam provisions: an Air Force veteran and an executive at an SDVOSB firm. They will split $3,674,250 of the settlement -- 17.25 percent of the total, a typical qui tam share -- with the remaining roughly $17.6 million going to the government. Investigators from the , the Defense Criminal Investigative Service, the Army's Criminal Investigation Division, , and the U.S. Postal Inspection Service worked the case alongside 's Civil Division and the U.S. Attorney's Office for the Northern District of New York.
View data as table
| Total FY2025 FCA recoveries | 6.8 |
|---|---|
| Health-care-related | 5.7 |
What happens next
The settlement is civil -- resolving False Claims Act liability, not a criminal conviction -- and 's announcement names no further action pending against Broadway, Cornerstone or their executives. But the office that brought this case says it isn't slowing down: DOJ's press release cites the Task Force to Eliminate Fraud and the National Fraud Enforcement Division it says the administration launched this year⧉, and its own separate accounting of fiscal 2025 shows 1,297 qui tam lawsuits filed that year -- a record -- and 401 new government-opened investigations⧉ -- a record level of enforcement activity says the new task force will keep building on.
- Broadway Electric and Cornerstone Contracting -- neither run by a service-disabled veteran -- used purported SDVOSBs as pass-through fronts for about 8 years (April 2017-May 2025), paying them 1-3% of contract value while controlling bidding, staffing, payroll and agency communications themselves; recovered $21.3 million in a June 9, 2026 False Claims Act settlement.
- The SDVOSB program the scheme exploited is large and, by 's own scorecard, over-performing: $32.5 billion in prime contracts in FY2025 against a 5% government-wide goal, built on a rule requiring 51% veteran ownership and control that Congress reinforced with mandatory VetCert certification by December 22, 2024.
- At least one SDVOSB owner inside the arrangement raised compliance concerns internally; nothing changed. The case that actually stopped it came from two outside whistleblowers -- an Air Force veteran and an SDVOSB executive -- who will split $3,674,250 (17.25%) of the settlement under the False Claims Act's qui tam provisions.
- frames this as one case inside a much larger enforcement push: FY2025 set records for both total False Claims Act recoveries ($6.8 billion) and qui tam filings (1,297), and the department's press release ties this settlement to a fraud task force it says launched in 2026 -- with no indication the pipeline is slowing.
All settlement facts are from Press Release Number 26-617, "Government Contractor and Executives to Pay $21.3M to Resolve Fraud Scheme Involving Service-Disabled Veteran-Owned Small Business Contracts," June 9, 2026, read in full via a sealed capture (justice.gov blocks generic scripted fetches but serves a standard browser request normally). The 17.25% relator share, the roughly $17.6 million net government recovery, the ~8-year scheme duration, the 0.31% share of FY2025's total FCA recoveries, and the ~$1.1 billion non-health-care FCA total are this piece's own arithmetic on 's and 's reported figures, not numbers those releases state directly (see analysis.json's computed[] for each method). SDVOSB program figures ($32.5B FY2025 prime contracts, the 5% goal, the 51% ownership-and-control rule, the December 22, 2024 VetCert deadline) are from 's own program page and FY2025 scorecard release, cited for the normative baseline the settled conduct violated and for program scale, not as facts about the Broadway/Cornerstone case. This story pins at headquarters, which brought and announced the case; at and headquarters, the program's administrator and the agency whose co-investigated; at the Chicago, IL area, where Broadway Electric and its affiliate Cornerstone Contracting are based; and at Albany, NY, nearest zone to the Northern District of New York U.S. Attorney's Office that prosecuted the case (multi-pin doctrine).
Sources(4) ▾
- U.S. Department of Justice, Office of Public Affairs, Government Contractor and Executives to Pay $21.3M to Resolve Fraud Scheme Involving Service-Disabled Veteran-Owned Small Business Contracts (2026-06-09) — Press Release Number 26-617, dated June 9, 2026 -- the primary announcement of the $21.3 million False Claims Act settlement, read in full via a sealed direct fetch (justice.gov returns HTTP 403 to generic scripted requests but serves a normal browser user-agent; sealed here rather than left as a pointer). Carries the settlement amount, the admitted pass-through conduct, the case caption and docket number, the whistleblower share, and the list of investigating agencies. justice.gov · original document
- U.S. Small Business Administration, SBA Releases FY25 Scorecard for Small Business Contracting (2026-06-25) — 's FY2025 government-wide small-business-contracting scorecard release, read in full. Supplies the $32.5 billion SDVOSB prime-contract total and the 5% statutory goal it exceeded, plus overall small-business-contracting scale figures ($179B prime, 28% of all federal prime contracts, 793,400 jobs) used here only for scale context. sba.gov · original document
- U.S. Small Business Administration, Veteran contracting assistance programs (2025-11-18) — 's SDVOSB program page, read in full. Supplies the 51%-ownership-and-control eligibility rule, the government-wide 5% contracting goal, and the National Defense Authorization Act of 2024's mandatory VetCert certification deadline (December 22, 2024) -- the documented standard the pass-through arrangement in the settled case circumvented. sba.gov · original document
- U.S. Department of Justice, Office of Public Affairs, False Claims Act Settlements and Judgments Exceed $6.8B in Fiscal Year 2025 (2026-01-16) — 's annual FY2025 False Claims Act recovery announcement, read in full. Supplies the $6.8 billion total (a record), the $5.7 billion health-care-related share, the 1,297 qui tam suits filed (also a record), and the $85 billion cumulative total since 1986 -- context for sizing the Broadway/Cornerstone settlement, not facts about that case itself. justice.gov · original document
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A settlement the Justice Department announced June 9, 2026⧉ closes out an eight-year scheme built on a simple substitution: the paperwork said service-disabled veterans controlled the contracts; Broadway Electric and Cornerstone Contracting, and their CEO and president, actually did. Neither executive is a service-disabled veteran. From roughly April 2017 through May 2025, the two firms used purported service-disabled-veteran-owned small businesses (SDVOSBs) -- a federal contracting category Congress reserves for firms that qualifying veterans genuinely own and control -- as fronts to win contracts they were not themselves eligible for. , working with the Small Business Administration (, which runs the SDVOSB program) and investigators from the , the Defense Department, the Army and , recovered $21.3 million.