A stint at a military prep school would no longer qualify people for a federal bidding preference reserved for disabled veterans under a bipartisan bill now before Congress.
Reps. Darrell Issa, R-Calif., and Tammy Duckworth, D-Ill., teamed up on a measure to require actual military service to qualify as the owner of a Service-Disabled, Veteran-Owned Small Business.
Issa is chairman of the House Committee on Oversight and Government Reform. Duckworth, a member of the committee, is a combat-wounded veteran who lost both legs while serving as a helicopter pilot in Iraq.
The SDVOSB program is meant to help veterans with service-connected disabilities by giving them preference in bidding on federal contracts.
Last year, about $12.3 billion in contracts went to firms that received the preference because the owner claimed to be a disabled veteran.
But as the Washington Examiner reported in a five-part series published in August, fraud is rampant in the program.
Recent studies by federal investigators show hundreds of millions of dollars are paid every year to firms that do not qualify.
The actual total lost to fraud and misrepresentation could run into the billions annually, according to reports from the Government Accountability Office and various inspectors general.
The Issa-Duckworth bill would not address the reforms recommended by federal investigators. Rather, it is tailored to close a loophole that was used by a Virginia-based business owner to win technology contracts with the IRS potentially worth $500 million.
Braulio Castillo injured his ankle in 1984 when he attended a military prep school affiliated with the U.S. Military Academy at West Point.
He went on to play football at the University of San Diego, and did not serve in the military. Yet 27 years later, Castillo used his ankle injury to qualify for a 30 percent service-connected disability rating, which he parlayed into a SDVOSB he used to qualify for the preferential IRS contracts.
Castillo received a tongue-lashing from Duckworth when he testified in front of the oversight committee in June.
“Shame on you,” Duckworth said. “You certainly broke the trust of this great nation. You broke the trust of veterans.”
The proposed legislation would require military service to qualify for the SDVOSB preference. Attendance at a military academy alone would no longer be enough.
“Those who never actually served our country are not — and should not — be entitled to receive this special status,” Issa said.
“This loophole must be closed to reduce these egregious abuses and prevent taxpayer dollars from being inappropriately awarded to nonveterans,” he said.
Duckworth called the bill “a common-sense solution to a small problem, but a good start so that we can spend taxpayer dollars more effectively and honor our veterans properly.”
Last year, the Senate passed an overhaul of the SDVOSB program aimed at reducing fraud by improving verification requirements. It died in the House.
Under current law, all agencies except the Department of Veterans Affairs allow contractors to “self-certify” and do not investigate their qualifications unless a bid protest is filed.
VA alone is required by law to verify claims made by firms seeking SDVOSB status. But that law only applies to vendors seeking to do business with the VA.
This week, a developer in New Mexico pleaded guilty to defrauding the SDVOSB program. Max Tafoya was charged with falsely claiming his firm, Tafoya Construction, qualified as an SDVOSB to secure almost $11 million in VA contracts.
To gain the preference, Tafoya paid his stepbrother, who is a disabled veteran, to allow the company to use his name on its corporate paperwork.
Tafoya faces 57 months in prison under the plea.