The Washington Post - USA (2020-08-10)

MONDAY, AUGUST 10 , 2020. THE WASHINGTON POST EZ RE A

COMPANIES
Emmes of Rockville appointed
Traci Clemons chief research
officer, Marian Ewell chief
scientific innovation officer and
Jennifer Hester c hief human
resources officer.
Quinn Evans o f the District
appointed Jennifer Henriksen
and Colin MacKillop principals
and Andrew Hollomon chief
technology officer.
Van Eperen of Rockville
appointed Niyah Brooks
account executive.

ASSOCIATIONS
A ND NONPROFITS
American Cleaning Institute
of the District appointed Arielle

Brown senior manager for

government affairs and Kaitlyn

Doherty coordinator for

meetings and member services.

American Council of Life

Insurers of the District

appointed Cindy Goff vice

president for supplemental

benefits and group insurance.

Credit Union National

Association o f the District

appointed Deshundra Jefferson

chief strategic communications

officer.

National Rural Electric

Cooperative Association o f

Arlington appointed Jana

Adams executive director of

Touchstone Energy

Cooperatives.

LAW AND LOBBYING

Davis Polk o f the District

appointed Jarrett Arp p artner in

the firm’s antitrust and

competition group.

Federal Practice Group of the

District appointed Isabel

Cottrell s enior associate.

Glover Park Group of the

District appointed Andréa

Richardson senior vice

president.

Send information about promotions,

appointments and personnel moves

in the Washington region to

[email protected].

cleared $1 billion in federal con-

tract receipts in 2020 despite the

economic crisis.

As it has grown ADS’s contin-

ued status as a small business

status has been critical to its par-

ticipation in the Defense Depart-

ment’s Tailored Logistics Support,

or TLS program, a lucrative mili-

tary supply line that is largely

restricted to SBA-approved small

and disadvantaged businesses.

In recent years, ADS’s official

head count has teetered close to

the SBA’s 500-employee limit for

small-company designation, and

the company has fought off re-

peated challenges to its size status.

If ADS were declared “no longer

small,” it would not only be ineligi-

ble for SBA coronavirus assis-

tance, but would also be forbidden

from competing on small business

set-aside contracts that drive its

business.

In 2017, ADS settled federal alle-

gations that it used a network of

allegedly-affiliated companies to

rig bids and fraudulently misrep-

resent its size. The Justice Depart-

ment called the $16 million settle-

ment “one of the largest recoveries

involving alleged fraud in connec-

tion with small business contract-

ing eligibility.”

Hillier, who has moved on from

the CEO role but remained the

company’s chairman as of July 20,

according to a company filing, sep-

arately paid $20 million to settle

federal allegations that he “violat-

ed the False Claims Act by fraudu-

lently obtaining federal set-aside

contracts reserved for small busi-

nesses that his company was ineli-

gible to receive.” The settlements

resulted from a Qui Tam lawsuit

brought by whistleblowers.

Two of the alleged affiliate busi-

nesses — Karda Systems and SEK

Solutions — were named in a

related case in which Ron Villan-

ueva, a former state lawmaker

from Virginia Beach, pleaded

guilty to federal charges that he

conspired to defraud the United

States. Villanueva admitted he

and a friend pretended both com-

panies were run by people who

qualified for particular grants and

drafted a misleading letter to the

SBA that mischaracterized the de-

gree to which one firm relied on

other suppliers.

ADS briefly lost its small busi-

ness designation as a result of

those allegations when a Defense

Department contracting officer,

concerned by ADS’s settlement,

requested a formal SBA review of

the company’s size status and its

degree of affiliation with other

companies named in the whistle-

blower lawsuit, according to docu-

ments obtained by The Washing-

ton Post.

That SBA review determined

ADS was “other than small,” which

temporarily blocked the company

from bidding on set-aside con-

tracts. But ADS successfully ap-

pealed that ruling, which was

reversed because it relied on old

financial records.

Today the company continues

to receive federal contracts desig-

nated for small firms. I ts most

recent size determination, which

found it to be a small business,

was finalized in November.

Aaron [email protected]

BY AARON GREGG

A military equipment supplier
that has been accused of fraudu-
lently misrepresenting its size to
benefit from privileges associated
with being a small business has
received a Paycheck Protection
Program small business loan
worth at least $2 million, public
records show.
Atlantic Diving Supply, a Vir-
ginia Beach-based reseller of spe-
cialized military gear, is the latest
organization whose receipt of tax-
payer-backed loans through the
Paycheck Protection Program has
raised questions about a program
launched in early April to help
sustain employment at small com-
panies through the economic cri-
sis.
In late April, the Treasury De-
partment retroactively clarified
its rules after well-known restau-
rant chains, car dealerships and
hotel companies reported receiv-
ing PPP loans. Several of them
returned the loan funds following
public uproar; others kept the
money.
The SBA has said it will audit all
PPP loans above $2 million to
determine whether the recipients
were eligible.
Representatives from the Small
Business Administration and At-
lantic Diving Supply did not com-
ment on the company’s receipt of
SBA loans.
The company’s legal issues are
detailed extensively in a report
released Monday by the nonprofit
Project on Government Oversight,
known as POGO. A review of busi-
ness data by POGO and the non-
profit Anti-Corruption Data Col-
lective concluded ADS was one of
at least 27 PPP recipients estimat-
ed annual sales of more than $
billion in 2019. Another 2,068 loan
recipients cleared $100 million in
sales last year, according to the
analysis.
Nick Schwellenbach, a senior
investigator at POGO, questioned

whether it is appropriate for ADS

to receive small business coronavi-

rus loans.

Schwellenbach’s investigation

also found two other firms alleg-

edly tied to ADS, including one

that was named in a settlement

with the Department of Justice,

separately received smaller PPP

loans.

“It’s important that taxpayer

funding reserved for genuine

small businesses isn’t siphoned off

by companies that are not eligi-

ble,” Schwellenbach said. “As a top

government contractor with reve-

nues well over a billion dollars a

year, it strains credibility that At-

lantic Diving Supply is a real small

business, especially given several

recent settlements and law en-

forcement outcomes related to

their alleged small business con-

tracting fraud.”

Although it received a favorable

ruling from the SBA as recently as

November 2019, ADS’s small busi-

ness credentials have long been

called into question.

ADS started as a small, family-

owned shop focused on the mili-

tary diving community in Virginia

Beach, which includes the Navy

SEALs. It was transformed under

the leadership of longtime chief

executive Luke Hillier, winning its

first major government contract

in 2000. It grew quickly to meet an

insatiable demand for military

gear of all sorts in the years follow-

ing the Sept. 11, 2001, attacks on

the United States.

That fast growth became per-

manent business as the U.S. mili-

tary presence in Iraq, Afghanistan

and elsewhere dragged on for

nearly two decades.

At one point, ADS filed papers

to go public, something usually

the purview of large corporations.

In 2015 it purchased Theodore

Wille International, a military

food and equipment supplier with

offices in seven countries.

Its business has remained

healthy despite recent troop re-

ductions. ADS received more than

$3 billion in unclassified govern-

ment contract dollars in 2019,

procurement records show. That’s

more than some well-known, ob-

jectively large government con-

tractors, including Bechtel, KBR

and CACI. ADS has already

Virginia Beach

military supplier

gets PPP money

Atlantic Diving’s status

as a small business

repeatedly raises doubts

capital business

APPOINTMENTS

Company Insider Title Date Action Shares Price Now holds

2U James Kenigsberg Chief technology officer July 31 Sold 33,900 47 120,

Carlyle Group Pamela L. Bentley Officer Aug. 3Sold 8,332 27.80 49,

Curtis L. Buser Chief financial officer Aug. 3Sold 58,203 27.80 851,

Jeffrey W. Ferguson General counsel Aug. 3Sold 22,861 27.80 879,

Christopher Finn Chief operating officer Aug. 3Sold 60,733 27.80 915,

Kewsong Lee Chief executive Aug. 3Sold 73,365 27.80 3,074,

Glenn A. Youngkin Chief executive Aug. 3Sold 13,871 27.80 8,315,

Cogent Communications Holdings John B. Chang Officer July 31 Sold 500 90 26,

CoStar Group Scott T. Wheeler Chief financial officer Aug. 4Sold 12,002 826.71 25,

Danaher Matthew McGrew Chief financial officer July 29 Sold 7,457 203.42 21,

Fortive Patrick K. Murphy Officer July 30 Sold 37,882 72.50 38,

Steven M. Rales Director Aug. 3 to Aug. 5Sold 3,600,000 69.46 to 70.47 13,031,

Liquidity Services Sam Guzman Officer Aug. 3Sold 10,000 5.16 —

NVR Thomas D. Eckert Director Aug. 3Sold 2,035 3,900 1,

Walker & Dunlop Howard W. Smith III President Aug. 3Sold 8,894 50.63 490,

Thomson Financial

Tr ading as reported by companies’ directors, presidents, chief financial officers, general counsel, chief executives,

chairmen and other officers, or by beneficial owners of more than 10 percent of a company’s stock.

TRANSACTIONS

2017 PHOTO BY SGT. JUSTIN UPDEGRAFF/OPERATION RESOLUTE SUPPORT/ASSOCIATED PRESS

Atlantic Diving Supply of Virginia Beach started as a small family operation but grew quickly to meet

demand for military gear in the years after the Sept. 11, 200 1, terrorist attacks on the United States.

A page of the loan application

for the Paycheck Protection

Program, which through the

Small Business Administration

provides funding to small

businesses struggling during

the coronavirus pandemic.

LUCAS JACKSON/REUTERS

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