Native corporation whistleblower presses fraud allegations

Ben Ferris, a retired Navy officer working in the Virginia office of the Afognak Native Corp., found himself stumped after delivering a keynote speech five years ago at a Seattle conference on government contracting rules.

It was his job to monitor Afognak's activities for compliance with various laws. But he began to suspect that something was amiss in the way the company's subsidiary, Alutiiq, qualified as a small business.

Afognak, one of the companies established through the 1971 Alaska Native Land Claims Settlement Act, has more than 1,000 shareholders descended from the village of Afognak on Kodiak Island.

Ferris was then the chief compliance officer for the company, which had evolved into a major government contractor aided by special preferences in federal law under the 8(a) program handled by the Small Business Administration, designed to promote small disadvantaged businesses. Alaska Native corporations have more privileges under the federal law than other groups, largely because of the work done decades ago by the late Sen. Ted Stevens.

"During the question-and-answer session following his speech Ferris began to question whether Afognak's operations were in compliance with the small business certification laws and regulations," says the lawsuit filed on his behalf.

By the end of that conference, he had no doubt, the lawsuit charges, that "Afognak was misrepresenting its small business status in their submissions for government contracts, as well as in the performance of these contracts."

Ferris said he went to his bosses, but the executives had no interest in changing the way they did business.

According to Ferris, Afognak had set up numerous fictitious subsidiaries that existed only as names on bids and invoices to receive 8(a) contracts. The real work was performed by the eight divisions of Alutiiq, he said, not by the "sham" subsidiaries.

A year later, while still working for Afognak, he filed a confidential lawsuit under the False Claims Act. The federal government declined to join the lawsuit and it became public knowledge in 2014.

Ferris would be entitled to compensation and damages under the False Claims Act if his lawsuit, which is inching forward in federal court, is successful.

The company and its associated subsidiaries have upward of 5,000 employees in 25 countries, handling hundreds of millions in contracts on everything from security at military installations to IT work. The village corporation has about 1,000 shareholders.

Alutiiq listed about 460 openings this week ranging from a gardener in Ridgecrest, California, to an armed security officer on the Kwajalein Atoll in the Marshall Islands. Nine of those jobs were for positions in Alaska.

Ferris, who left the company in 2014, a month before the suit became public, continues to battle Afognak over access to documents, attorney fees and whether the case should be rejected. Afognak, which has provided 144,000 documents, rejects all of his charges and says it has complied with federal law.

Ferris claims that the fictional companies exist so that the company can qualify for more government contracts and stay below federal caps.

On Aug. 11, U.S. District Judge H. Russel Holland refused the latest attempt by Afognak to toss the case.

Holland said Ferris had "plausibly alleged that if the SBA knew that defendants' 8(a) subsidiaries existed on paper only, as he alleges, the SBA would not have allowed them to participate in the 8(a) program."

Afognak says the federal government has been aware of the allegations by Ferris since 2013 and done nothing about them. That shows, the company says, that the SBA sees no problem and that Ferris has no case.

But Holland rejected that logic, saying there is nothing in the record that shows the Justice Department shared the 2013 complaint with the SBA or that the SBA is aware of the details.

A 2014 report by the General Accountability Office concluded that oversight weaknesses in the SBA limited its ability to monitor compliance with program requirements.

In his latest ruling, Holland put off the question that could be framed as "What did the SBA know and when did it know it?"

In June, Holland refused to dismiss the case over allegations that Ferris improperly kept and used nine privileged documents, but he did sanction Ferris, saying he would have to pay attorney fees in connection with the nine documents.

Afognak is seeking $379,705 for work dealing with the nine documents over the past few years.

Ferris, who says he lives paycheck to paycheck and supports an adult daughter and grandson, says that is excessive and unfair because he is going against a "government-contracting juggernaut with immense financial wealth."

Columnist Dermot Cole can be reached at dermot@alaskadispatch.com. 

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