The first hit was serious: the Washington Post in November published its lengthy investigation of small federal contractor MicroTechnologies LLC and its founder and chief executive, Anthony Jimenez, claiming to show a pattern of contracting abuses.

But initial reaction was muted (Set-Aside Alert Nov. 22, 2013), in part because of apparent gaps and missing details in the Post articles, but also because of Jimenez’ strong denials of any wrongdoing and prominent support for Jimenez in the media. Some in the contracting world even considered the Post series a sucker punch.

But now the other blow has landed, and this one could be much more damaging: the Small Business Administration on Dec. 20 initiated proceedings to impose debarment for MicroTech and Jimenez for an unspecified period of time. A contractor or firm that is debarred is banned from participating in any federal contracts.

In a Dec. 20 letter outlining the SBA’s allegations, John Klein, SBA suspension and debarment official, accused MicroTech and Jimenez of providing “false and misleading statements” about the company’s ownership and operations to the SBA.

The eight-page letter details several examples of alleged false or misleading statements made by MicroTech with respect to two other companies, GovWare LLC and MicroLink LLC.

For example, Jimenez, former owner of GovWare, told the SBA in an application for the 8(a) program that he had sold off the controlling interest in GovWare in 2005. In 2007, Jimenez allegedly regained ownership of GovWare at a bargain price.

“How is it that Mr. Jimenez and his partners in MicroTech... were able to own and control GovWare in 2007 when Mr. Jimenez and MicroTech previously told SBA that (they) were just passive investors and that the businesses were completely separate and had ‘no business relationship?’” Klein wrote in the letter.

“It appears that the answer is that Mr. Jimenez and MicroTech purposefully misled SBA about the relationship in 2005 and also withheld corporate documents from SBA,” Klein added.

Specifically, Jimenez withheld from the SBA a copy of a May 31, 2005 option agreement that allowed Jimenez to repurchase ownership of GovWare for a few hundred dollars, the SBA charged.

The SBA also detailed allegations that Jimenez and MicroTech made false and misleading statements about their connections with MicroLink. Jimenez and MicroTech told the SBA there was “no link, relationhip, or partnership of any kind” between the two companies, the SBA said.

However, the SBA documented more than $1.5 million in commissions, accounting fees and consulting expenses allegedly paid by MicroTech to MicroLink from 2005 to 2008.

“Rather than having no links, no relationships, no partnerships of any kind, and no business together ever, MicroTech reported substantial payments to MicroLink,” the SBA’s Klein wrote. The SBA also alleged that MicroTech failed to report significant MicroLink ownership by one of its investors, and also failed to tell SBA of a company executive position held by another of its investors, among other claims.

MicroTech has 30 days to respond, after which there may be additional time for fact-finding. During the interim period, the company may perform its current contracts but is ineligible for new contracts.

If debarment is imposed, its duration would be set at that time based on the “seriousness of the cause,” Klein wrote. In some cases, vendors are debarred indefinitely; in other cases, a matter of weeks.

MicroTech and Jimenez did not respond to Set-Aside Alert’s requests for comment. Previously, company officials had told the Post that “MicroTech has not broken any laws and has conducted itself in an ethical manner.”

In a related development, the Air Force deputy general counsel has questioned MicroTech regarding its alleged fraud with software maker Autonomy shortly before Autonomy was acquired by Hewlett Packard in 2011, according to the Washington Post. The alleged accounting maneuvers boosted up Autonomy’s price, costing HP as much as $8 billion.

Autonomy and MicroTech are accused of accounting improprieties serious enough to merit proposed debarments, the Air Force said, according to the Washington Post.

The recent developments pose a dramatic challenge for MicroTech, which has been one of the fastest-growing small federal contractors since it was founded in 2004. The company has been awarded a total of more than $1 billion in federal technology contracts, about a third of them through set-asides for small vendors owned by service-disabled veterans and for small disadvantaged businesses. Jimenez is a service-disabled veteran. Based in Vienna, VA the firm has about 400 employees.

More information:
Washington Post articles: http://goo.gl/ueDU1C and http://goo.gl/tJSaKk
SBA letter http://goo.gl/BIhzwv