Hayden construction firm faces federal civil lawsuit

A Hayden company faces federal charges for allegedly misrepresenting itself in an effort to procure millions of dollars in contracts meant for businesses in economically strapped central Idaho.

Northcon Inc. of Hayden and its president, Randall L. Smith, are accused of fraudulently representing to federal officials and the Small Business Administration that Northcon’s principal office was located in Orofino, and that 35 percent of its workers lived in a zone deemed economically underprivileged, according to charges filed in Coeur d’Alene federal court.

Those zones, called HUBZones are targeted by the federal government for small business contracts. The set-aside contracts are awarded on a limited-competition basis.

Northcon and Smith are charged with four civil counts including making false statements, misrepresentation and false enrichment.

According to court records, Northcon and Smith designated an office in Orofino — a HUBZone — as their primary office and stated 16 employees worked there clocking 40 hours per month in an effort to be eligible for the federal contracts destined for central Idaho’s HUBZone.

But federal investigators found only two employees at what appeared to be a satellite office.

“Northcon’s Orofino office was a sham designed by defendants to create the false impression ...” according to the civil suit.

The construction company perpetrated this fraud to avoid being decertified and to remain eligible for the HUBZone contracts, the complaint alleges.

In an email response to The Press, Smith wrote Tuesday that the company is aware of the lawsuit, but “the complaint does not question the quality of our work on the completed contracts we performed on our projects with the federal government.”

Smith said Northcon and its attorneys have worked with prosecutors to resolve the conflict.

“We have been fully cooperating with the government in its investigation of our HUBZone status now for several years, and were surprised and disappointed that the government has now chosen to file a complaint,” Smith wrote.

U.S. attorneys say the company ran the fraud at various times between September 2011 and December 2013, when the company got Department of the Army and Homeland Security contracts and submitted 812 claims for payment valued at almost $53 million.

Each of the false claims for payment constitutes a separate violation of the federal False Claims Act, prosecutors said.

The False Claims Act is the government’s primary tool to prevent contractors from wrongfully being awarded and paid via federal contracts. The law is interpreted broadly, “so as to apply to all those who receive government monies to which they are not entitled,” according to the complaint.

Northcon, with its Hayden office located at 10615 N. Government Way, was first granted HUBZone status in 2001. That made them eligible for set-aside contracts, and regularly recertified when Hayden was designated a HUBZone area. Northcon lost its HUBZone eligibility in 2011 when Hayden, because of its increasing population, lost its HUBZone status, but central Idaho remained inside the HUBZone.

Smith said he and his attorney will continue to seek a solution to the suit.

“We continue to hope that we can resolve our disagreement with the government amicably, but we are prepared to vigorously defend ourselves in court if needed,” Smith wrote Tuesday.