One of the general and principal benefits of incorporating a business entity is limited liability; the owners of a corporation are not liable for the corporation’s actions or debts. There are, however, exceptions. One of the exceptions is the doctrine of “piercing the corporate veil,” under which courts may cast aside the “veil” of incorporation and hold a corporation’s shareholders personally liable for the corporation’s actions. Continue Reading First Department of New York Loosens the Standard for “Piercing the Corporate Veil”
On December 3, Jennifer Horn and Maria Panichelli presented the second webinar in their core construction curriculum series for Women Impacting Public Policy and Give Me 5%. The presentation, entitled “Best Practices in Construction,” covered suggested best practices for before, during, and after conclusion of a construction project, in the context of both state and federal jobs. The presentation provides tips on contracting, documentation, compliance, and claims prevention strategies. Start implementing business practices that make the difference between a profitable construction project and one that exposes your company to financial risk now! Check out: “Give Me 5: Best Practices in Construction,” here.
On November 12, Jennifer Horn and Maria Panichelli presented the first webinar in their core construction curriculum series on the Federal Acquisition Regulations and Federal Procurement for Women Impacting Public Policy and Give Me 5%. The presentation covered the bidding process for both sealed bidding and negotiated procurement. Improve your understanding of FAR and its application in the construction context by checking out “Give Me 5: Construction Unit FAR 101 – Part 1, The Fundamentals of the Federal Acquisition Regulations and Federal Procurement: The Bidding Process,” here.
WIPP is a national nonpartisan public policy organization advocating on behalf of its coalition of 4.7 million businesswomen including 75 business organizations. WIPP identifies important trends and opportunities and provides a collaborative model for the public and private sectors to increase the economic power of women-owned businesses. Give Me 5%, named after the 5% federal contracting goal for women-owned businesses, was created to educate women business owners on how to apply for and secure federal procurement opportunities. GiveMe5 is working to improve the WOSB Procurement Program to increase access to contracts for women entrepreneurs.
Jennifer and Maria will begin the Core Construction Curriculum series with two webinars. On November 12th at 2:00pm they will be presenting Give Me 5: Construction Unit FAR 101 – Part 1, The Fundamentals of the Federal Acquisition Regulations and Federal Procurement: The Bidding Process. The Federal Acquisition Regulations or “FAR” can be confusing whether you are new to federal contracting or have been contracting with the government for years. This webinar will focus on improving participants’ understanding of FAR and its application in the construction context. The presentation will cover the bidding process for both sealed bidding and negotiated procurement. You can find a description of the presentation and registration information, here.
On December 3rd at 2:00pm Jennifer and Maria will be presenting Best Practices in Federal Construction. Whether you a contractor working on federal, state or private projects, certain construction practices should be followed to ensure that you and your company are protected on the project. Observing best business practices can mean the difference between a profitable construction project and one that exposes your company to financial risk. This Webinar will focus on best construction practices before, during and at the conclusion of a construction project. Read more and register, here.
We will keep you posted on additional webinar topics and times. If you have suggested topics, feel free to contact Jennifer or Maria.
Jennifer M. Horn is a Partner at Cohen Seglias and a member of the Construction Group. She concentrates her practice in the areas of construction litigation and real estate.
Maria L. Panichelli is an Associate in the firm’s Federal Practice Group.
By: Jennifer M. Horn, Daniel E. Fierstein and Katherine Tohanczyn
As many federal government contractors know, the False Claims Act (FCA) is a tool used by the federal government to deter fraud. Those found to have knowingly submitted false information to the government in violation of the FCA stand to suffer the imposition of fines, forfeiture of improperly obtained proceeds, and, in some instances, incarceration.
Recently, in the largest reported fraud case involving a disadvantaged business enterprise (DBE) in the country’s history, a Pennsylvania federal judge ruled against a government contractor in a $136 million DBE fraud claim brought by a former employee and whistleblower under the FCA. In that case, Schuylkill Products, Inc. (SPI), a Pennsylvania-based concrete bridge beam manufacturing company, conspired with and used Marikina Construction, Corp. (Marikina) as a “DBE” front to procure millions of dollars of federally funded DBE-designated work.
What Is a DBE Program?
Like many governmental agencies, the U.S. Department of Transportation (DOT) has a DBE program, which attempts to increase the participation of DBEs in state and local procurement. The DOT seeks to accomplish this goal by requiring state and local agencies receiving DOT funds to establish goals and requirements for the participation of DBEs (small businesses owned and controlled by socially and economically disadvantaged individuals, such as businesses owned by minorities and women). Contractors working on these transportation projects must make a good-faith attempt to meet specific DBE participation goals as a requirement of federal funding and can do so by subcontracting work that is actually performed and installed by a certified DBE.
The Schuylkill Products Case
In Schuylkill Products, SPI, its wholly owned subsidiary (CDS Engineers), and Marikina, a Connecticut-based contractor certified in Pennsylvania as a DBE, created a scheme through which Marikina subcontracted work to SPI that was federally mandated to be performed by a DBE. SPI employees, pretending to be Marikina employees, performed the work and received the profits. In order to give the appearance of compliance with the DBE rules to the federal government, PENNDOT, and the general contractor, SPI used Marikina business cards, email addresses, stationary, and decals in order to create the appearance that Marikina was performing the work.
Judge Rambo of the United States District Court for the Middle District of Pennsylvania found that this conduct fell squarely within the scope of the FCA and constituted clear violations of the FCA. Accordingly, the United States (and the former employee who initiated the FCA lawsuit) are entitled to monetary damages (the Court has not yet ruled upon the amount).
What Is the Takeaway from Schuylkill Products?
Schuylkill Products serves as a forceful reminder of the power of the FCA. The government, through its agencies and the private individuals that are permitted to enforce the FCA, monitors DBE compliance very carefully.
On the one hand, these programs provide excellent opportunities for small businesses to compete for government contracts on a more level playing field. On the other hand, the maze of rules and regulations that govern these programs must be taken seriously and followed carefully. In the face of this landscape, government contractors and contractors looking to enter the government contracting arena should consult with a construction attorney to ensure that their particular corporate structure, behavior, and contract comports with the rules.
Jennifer M. Horn is a Partner at Cohen Seglias and a member of the Construction Group. She concentrates her practice in the areas of construction litigation and real estate.
Daniel E. Fierstein is an Associate in the Construction Group of Cohen Seglias and focuses his practice on construction law. Dan counsels clients at all tiers of the construction industry, including general contractors, subcontractors, owners, developers, and design professionals.
Katherine Tohanczyn is a Summer Associate in the Construction Group of Cohen Seglias.
On Tuesday, March 22, 2011, the Pittsburgh chapter of the National Association of Women in Construction (NAWIC) held an event during which Karen Waigand, the Women’s Business Coordinator for the Small Business Administration (SBA), spoke about the SBA’s new Women-Owned Small Business Federal Contract Program that kicked off on February 4, 2011.
The SBA’s new program is designed to provide equal access to federal contracting opportunities for women-owned small businesses (WOSBs) and economically disadvantaged women-owned small businesses (EDWOSBs) by allowing contracting officers to set aside specific federal contracts for those companies that are certified WOSBs or EDWOSBs. Set asides are expected to be for contracts up to $5 million in the manufacturing industry and up to $3 million for all other contracts. Set asides are not yet available; however, they are expected to appear at some point in the last fiscal quarter of the year.
Currently, to participate in the program, a company must meet the eligibility requirements for a WOSB or EDWOSB and self-certify their business by uploading the necessary required documents to the SBA’s online WOSB Program Repository. This self-certification process is free. In the future, the SBA also plans to allow WOSBs and EDWOSBs to be certified by national certifying entities approved by the SBA. At this time, however, no such third-party certifiers have been approved.
In addition to the certification process, all WOSBs and EDWOSBs must register their status in the Central Contractor Registration (CCR) and the Online Representations and Certifications Application (ORCA). This will indicate to contracting officers that the WOSB and/or EDWOSB is eligible to participate in the program. At this time, the CCR and ORCA are being updated and are expected to be ready for use in April 2011.
According to Ms. Waigand, the time between now and April is a ramping up period, and the SBA hopes that all qualifying WOSBs and EDWOSBs will use this time to get familiar with the program’s requirements and upload the necessary documents to the WOSB Program Repository. The goal is for WOSBs and EDWOSBs to be ready to compete for contracts awarded in the fourth quarter of 2011, which is when the majority of small business contracts are awarded.
Additional information about the WOSB Federal Contract Program can be obtained by visiting www.sba.gov/wosb.
Cohen Seglias partner Edward T. DeLisle recently wrote the following post for our sister blog, Federal Construction Contracting Blog, which we thought would be of interest to Construction Law Signal readers as well.
As of Friday, February 4, 2011, women-owned small businesses could begin taking steps to participate in a new federal contracting program just for them. The new Women-Owned Small Business (WOSB) Federal Contract Program (the Program) will be fully implemented over the next several months, with the first contracts expected to be let during the fourth quarter of this year.
The Program will provide greater access to federal contracting opportunities for WOSBs and economically-disadvantaged women-owned small businesses (EDWOSBs). It allows contracting officers, for the first time, to set aside specific contracts for certified WOSBs and EDWOSBs, which will assist federal agencies in achieving the existing five percent statutory goal of federal contracting dollars for WOSBs.
Complete information and eligibility requirements of the Program are listed on the SBA website.
Please be sure to frequently check the Federal Construction Contracting Blog for regular federal contracting updates.
On September 27, 2010, President Obama signed into law the Small Business Jobs and Credit Act of 2010 (Act). The Act was designed to provide immediate relief and is expected to provide critical resources to help small businesses continue to drive economic recovery and create jobs. Significantly, the Act authorizes the creation of a $30 billion fund to encourage lending by community banks to small businesses. The Act also contains a series of tax incentives and revenue changes to the Internal Revenue Code.
$30 Billion Small Business Lending Fund
The Act establishes a new $30 billion Small Business Lending Fund which will be administered by the Treasury. The Fund will be available to community banks, which could use the money to leverage billions more in loans. The Act will provide smaller community banks with low cost capital – as low as 1% – if they go above and beyond 2009 small business lending levels.
Impact on SBA Programs
The Act increases the maximum loan size for U.S. Small Business Administration (SBA) Loan Programs. Among other provisions, the Act permanently raises the maximum size for SBA’s two largest loan programs, increasing the maximum 7(a) and 504 loans from $2 million to $5 million, and the maximum 504 manufacturing-related loan from $4 million to $5.5 million. In addition, the Act increases the maximum loan size for SBA Express Loans from $350,000 to $1 million. The desired effect is to provide greater access for small businesses to working capital that, in turn, could be used to purchase new inventory and to obtain new orders with the ultimate goal of creating new jobs.
In addition to the lending expansion, an incentive is being offered to strengthen innovative state small business programs, supplying at least $1.5 billion in small business lending through a new State Small Business Credit Initiative. This initiative is designed to encourage private-sector lenders to extend additional credit.
Significant Tax Provisions
The following tax cuts go into effect immediately:
• Extension and expansion of small businesses’ ability to immediately expense capital investments: The previous expensing limitation of $250,000 was increased to $500,000 and expanded to include certain qualified real property. This benefit is available to property placed in service after January 1, 2010, and tax years beginning on or after January 1, 2010. This provision applies only in 2010 and 2011 tax years.
• Extension of bonus depreciation: This tax cut benefits businesses acquiring property that meets the requirements of Internal Revenue Code Section 168(k) for property purchased and placed in service in 2010. This is a temporary one year extension of bonus depreciation and generally applies only to property placed in service in 2010.
• A new deduction of health insurance costs for the self-employed: This benefit applies to self-employed individuals for the 2010 tax year only.
• Tax relief and simplification for cell phone deductions: Businesses that provide employees with cell phones or other communication devices can permanently deduct expenses associated therewith for tax years beginning after December 31, 2009.
• An increase in the deduction for entrepreneurs’ start-up expenses: The Act temporarily increases the amount of start-up expenditures that entrepreneurs can deduct from their taxes for the 2010 tax year from $5,000 to $10,000.
• Five-year carryback of general business credits: The Act will allow certain small business to “carry back” their general business credits to offset five years of taxes. This benefit applies only in the 2010 tax year.
• Limitations on penalties for errors in tax reporting: Beginning this year, the penalty for failing to report certain tax transactions changes from a fixed dollar amount to a percentage of the tax benefits from the misreported transaction.
• Elimination of 100% of gain on sale of certain small business stock: There is a limitation of one-year on stock acquired after the date of enactment and before January 1, 2011, but the 100% exclusion for sale of stock is permanent if the stock meets requirements for qualified small business stock.
• Reporting of rental property: Beginning in 2011, taxpayers who receive rental income from leasing real property will be required to file information returns (generally, Form 1099) with the IRS and with service providers (e.g., plumbers, painters, accountants) to report payments of $600 or more to that service provider in any tax year. There will be exemptions from these requirements, but those are to be determined under forthcoming IRS regulations.
Federal Contracting Implications
The desired effect of the Act is to create more opportunities for small businesses. The Act provides grants to enable small businesses to team up with each other to compete for larger and more complex federal government contracts. In order to create a more level playing field for small businesses, greater accountability will be required from large business prime contractors to promptly pay small business subcontractors. Moreover, levy rules for federal contractors with federal tax liabilities have been permanently changed by the Act. Additionally, the Act makes it harder for agencies to “bundle” contracts, a practice that commonly eliminates opportunities for small businesses. The Act adds teeth to the current regulations, making agencies more accountable for reaching small business goals.
Small business owners are encouraged to explore which provisions of the Act may apply to their business, when those provisions begin to apply and how long the relevant provisions will apply.
For further information about the impact of the Act on your business, please contact Marian A. Kornilowicz, Chair of the Business Transactions Group at Cohen Seglias.