Homeland Security drops contractors accused of operating as fronts for large company

Washington Post Staff Writer
Thursday, February 10, 2011; 6:57 PM

Two small businesses accused of operating as fronts for a large company have been dropped from a $3 billion Department of Homeland Security contracting program.

EG Solutions and MultimaxArray Firstsource have received almost 900 orders worth more than $270 million through First Source, a program that was intended to boost small technology companies by setting aside federal contracting work for them.

Both companies were temporarily suspended in November by the Small Business Administration, which accused them of passing on work and profits to a large government contractor that was not eligible for the program. In letters to the suspended firms in November, the SBA said, "There is adequate evidence that [EG Solutions and MultimaxArray] committed fraud or a criminal offense."

On Thursday, a Homeland Security spokesman said the small firms' annual contracts were not renewed because of those suspensions.

Since 2007, EG Solutions has received $201 million in First Source contracts, while MultimaxArray received about $70 million worth of work.

The contracts of nine First Source firms were renewed this week.

The government's enforcement efforts follow a Washington Post investigation of Alaska native corporations, or ANCs, and small business programs last year. The mandate of the ANC program is to improve life for Alaska's struggling indigenous people. But much of the money has gone instead to nonnative people and companies in the lower 48 states.

The Post detailed how EG Solutions and MultimaxArray had allowed GTSI Corp., a large Herndon-based technology firm, to do much of the work and receive most of the profits from their First Source contracts.

GTSI has been part-owner of EG Solutions and of its parent, Eyak Technology, an Alaska native corporation subsidiary near Dulles International Airport.

In October, GTSI was suspended from government contracting by the SBA, which said the arrangements appeared to be "in direct contravention of applicable laws and regulations." Two top GTSI executives resigned, and three others were put on leave indefinitely as part of a settlement that enabled GTSI to resume receiving federal contracts.

Officials from EG Solutions and MultimaxArray did not respond to phone calls seeking comment. Both companies previously have denied any wrongdoing.

In a prior statement, Eyak Corp., the ANC parent of EG Solutions, said it is committed to "following the letter of the law regarding all SBA rules and regulations."

The decision by Homeland Security to drop the small firms comes amid a swirl of administrative, civil and criminal investigations relating to small business and ANC contracts. After The Post articles, Homeland Security officials launched a "comprehensive review" of First Source to examine whether the businesses are doing the proper amount of work themselves.

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