The former CEO of a Virginia Beach defense contractor will pay $20 million to settle allegations he worked with others to fraudulently obtain federal contracts that had been set-aside for small businesses, the Justice Department announced Tuesday.
The settlement reached by Luke Hillier is on top of a $16 million deal ADS Inc. and its subsidiaries reached two years ago with the federal government. Neither settlement came with any admission of liability.
According to the Justice Department, the combined settlements rank as “the largest False Claims Act recovery based on allegations of small business contracting fraud.”
“The government expects people to be truthful in their dealings with the government, and the United States will investigate and pursue those that fail to live up to that expectation,” U.S. Attorney for the District of Columbia Jessie K. Liu said in a statement.
Calls and emails to Hillier’s attorney, Brian Whisler, were not returned.
In a statement, an ADS spokeswoman stressed Hillier has not been a part of the company’s day-to-day operations for almost a decade and that the settlement in question “relates to allegations dating back more than ten years.”
The Justice Department said Hillier remains the majority owner of ADS.
“We are pleased that Mr. Hillier has reached an amicable resolution with the government officially putting his matter to rest, allowing him to continue his philanthropic endeavors, while ADS continues to focus on doing what we do best: supporting the U.S. military community,” Caitlin Stojanovich said.
The settlements came in response to a so-called “qui tam” lawsuit that was filed in November 2013 under the whistle blower provision of the False Claims Act. Such lawsuits allow private parties to sue on behalf of the United States for false claims and to be awarded a portion of the funds recovered.
Ameliorate Partners, a limited liability partnership formed in Delaware in 2013, received more than $6.6 million in this case.
The Justice Department claimed Hillier caused ADS, which currently boasts more than 400 employees, to falsely represent itself as a small business. In an earlier news release, the department said the company was secretly affiliated with several companies, including SEK Solutions, Karda Systems, MJL Enterprises LLC, London Bridge Trading Co. and Mythics Inc.
As a result of Hillier’s false representations, ADS was awarded “numerous small business set-aside contracts for which it was ineligible,” the Justice Department said Tuesday.
For years, federal agents have investigated Hillier’s connections to two top SEK Solutions executives.
Khalil Naim, a friend of Hillier’s from Old Dominion University, and former Del. Ron Villanueva, the recipient of some of Hillier’s political donations, were implicated in a scheme to improperly secure special government contracts.
Both men have pleaded guilty to federal charges. Naim was sentenced to one month in jail and Villanueva was sentenced to 21/2 years.
While not identified by name in court documents, federal prosecutors claimed a man matching Hillier’s description introduced Naim and Villanueva and explained to Naim how the man’s company could secure contracts set aside for minority- and women-owned businesses by partnering with companies like SEK.
Naim has spoken with federal investigators about how Hillier introduced him to Villanueva at a Virginia Beach restaurant, according to Trey Kelleter, Naim’s attorney. In court, Kelleter described the relationship as “a conspiracy to criminally violate the small business laws.”
Earlier this year, however, Kelleter said federal prosecutors notified him that they would not be charging Hillier and would not need his client’s assistance.
A spokesman for the U.S. attorney for the Eastern District of Virginia declined to comment.
In addition to ADS and Hillier, several other companies and individuals have entered into smaller settlement agreements with the government.
MJL Enterprises LLC has agreed to pay $400,000, SEK Solutions has agreed to pay $140,000 and Karda Systems has agreed to pay $80,000. Charles Salle, former general counsel for ADS and a current vice chairman of the Virginia Beach Development Authority, has agreed to pay $225,000.
None of those settlements came with admissions of liability.
Over the past two decades, ADS has evolved from a small shop selling diving equipment into a billion-dollar-plus business.
Its roots go back to 1979, with the founding of Lynnhaven Dive Center by Hillier’s father. In 1997, Hillier returned to the family business to start Atlantic Diving Supply Inc. and focus on serving government customers, according to the company’s website.
The company served as a kind of middleman for the Pentagon as the wars in Iraq and Afghanistan unfolded in the wake of the 9/11 attacks, catering particularly to Navy SEALs and special-operations units. The website said the company holds more than 50 Indefinite Delivery, Indefinite Quantity contracts and Blanket Purchase Agreements, and is now considered a “Top 50 Federal Government Contractor.”
For most of the past decade, ADS’s yearly contract totals hovered around $1 billion, according to data from USAspending.gov. That figure shot up to more than $2.5 billion last year.
In 2015, Hillier and his wife, Stephanie, founded Hillier Ignite. The private foundation is intended to “promote democracy and freedom by creating opportunity,” according to its website. It gives grants to help entrepreneurs, youth and the military.
Over the years, Hillier has donated to various organizations. In 2016, he built the Hillier Ignite Fitness Park at the Oceanfront. And earlier this year, he put up $20,000 to help bring home the remains of a man who died in Croatia attending a wedding. Michael Cunningham had ties to the Eastern Shore.
