Chicago Electrical Contractor Pays $21.3M to Settle Veteran-Owned Contract Fraud Case
Chicago-area Broadway Electric Inc. and sister company Cornerstone Contracting Inc. will pay $21.3 million to settle False Claims Act allegations tied to fake service-disabled veteran-owned business contracts, ENR reports.
Market Impact
The settlement, revealed in an August 25 General Services Administration press release, resolves claims that Broadway, Cornerstone, CEO John Oehler, and President Christian Blake ran a scheme from roughly April 2017 through May 2025 to win federal contracts set aside for service-disabled veteran-owned small businesses and other eligible small firms. Both Oehler and Blake admitted they are not service-disabled veterans and did not qualify to own or control a service-disabled veteran-owned small business.
According to ENR, investigators found that Broadway and Cornerstone personnel prepared and priced bids submitted under the names of purported small businesses, secured bonding, selected subcontractors, and controlled project staffing and financial administration. The pass-through entities used to win the contracts received only 1% to 3% of the contract value for lending their names. Broadway and Cornerstone are the first construction companies identified in a broader, multibillion-dollar GSA anti-procurement fraud investigation. Broadway, based in Mount Prospect, Illinois, works as an electrical prime and subcontractor, with its largest current job being the $1.45 billion connector project at O’Hare International Airport.
What It Means for Subcontractors
- Firms teaming with set-aside partners on federal work should audit who actually controls bidding, bonding, subcontractor selection, and financial administration on those jobs, since DOJ used exactly those factors to prove the pass-through scheme.
- Pass-through arrangements paying a nominal partner 1% to 3% of contract value, as alleged in this case, are now a documented red flag pattern that GSA investigators are actively pursuing across agencies it manages real estate for.
- Electrical, mechanical, and general subcontractors bidding GSA-managed or federal building work should expect increased documentation requests on veteran-owned and small-business set-aside teaming agreements going forward, given this is the first construction case tied to a “multibillion-dollar” probe.
- Legitimate service-disabled veteran-owned and minority-owned firms should keep records showing they perform their own bid pricing, staffing decisions, and project controls, since that documentation is what distinguishes real set-aside eligibility from a pass-through arrangement under False Claims Act scrutiny.
- Companies currently in teaming arrangements resembling the Broadway/Cornerstone structure should consult counsel before their next federal bid submission, since the $21.3 million penalty plus separate fines and restitution against Oehler and Blake show DOJ is pursuing both corporate and individual liability.
