Here’s a riddle: What Virginia Beach-based company won more than $1 billion worth of government contracts in the last quarter of 2019 and had another $1.3 billion in contract obligations for 2020, yet still applied for a COVID-19 relief loan worth between $2 million and $5 million intended for small businesses?
The answer: ADS Inc., or Atlantic Diving Supply, which had been accused as recently as last year by the Small Business Administration Office of Government Contracting of masquerading as a small enterprise in order to get contracts meant for small businesses. ADS appealed and won, saying it had less than 500 employees, and disputed allegations it was affiliated with other companies despite earlier settlements.
Earlier this week, ADS found itself front and center in a recent report from a nonprofit called the Project on Government Oversight, because it was among the thousands of businesses to seek pandemic-based relief through the federal government’s Paycheck Protection Program. The program offered potentially forgivable loans to small businesses so long as they kept their employees on payroll and used the money to keep the lights on or pay their rent or mortgage. The list released by the government includes who was approved for loans and a range for an amount, but it doesn’t confirm that the companies took a loan for the full amount, if at all.
The report rehashes much of what The Virginian-Pilot and Washington Post have already reported about the recent history of ADS, ranked as the 22nd largest government contractor in fiscal year 2019 and top contractor for just the Defense Logistics Agency for its $3.2 billion in contracts that year, according to Bloomberg Government. A whistleblower first sued ADS on behalf of the U.S. government in 2013, alleging the company falsely claimed it was a small business in order to qualify for contracts by secretly controlling related business entities.
The company settled with the Justice Department in 2017 for $16 million without admitting any wrongdoing. The company said at the time that the settlement was made to avoid a protracted and costly legal case. In 2019, majority owner and former CEO Luke Hillier settled for another $20 million, again without admitting any wrongdoing.
The Paycheck Protection Program, quickly introduced in March in an attempt to stem an economic downfall because of coronavirus-caused shutdowns, has so far approved more than 5 million loans worth $521 billion total. While it certainly helped many small businesses survive, the program has been criticized for allowing large chains, publicly-traded companies and even celebrities to apply and be approved for millions of dollars in loans.
While the applications for the loans were a single page front-and-back, applicants have been required to self-certify that by applying, they are indeed a small business in size (with fewer than 500 employees) taking into account any affiliated companies that had also applied.
ADS Inc. has historically said it had more than 400 employees but fewer than 500.
Among other companies that applied for PPP loans that the U.S. Justice Department has linked to ADS as affiliates in the past are Tactical Distributors (also known as TDI LLC), which was approved for a PPP loan worth $350,000 to $1 million, and MJL Enterprises LLC, which was approved for a loan worth $150,000 to $350,000 loan.
ADS denied affiliation with MJL Enterprises in its earlier appeal to the Small Business Administration on its size. Without admitting any wrong-doing, that company agreed in 2017 to settle its case with the U.S. government, which said it falsely claimed to be an eligible service-disabled veteran-owned company, for $400,000. Copies of the settlement agreements obtained by The Pilot at the time indicated that Tactical Distributors was a subsidiary of ADS and ADS managed MJL.
ADS did not respond to questions from The Pilot for this report.
