A Virginia businessman who helped transform his family’s dive shop into a multibillion-dollar supplier of tactical military gear — fueled in large part by contracts earmarked for small businesses — has agreed to settle civil allegations that he defrauded the government by obtaining contracts for small businesses that his company shouldn’t have received, the Justice Department announced Tuesday.

Luke Hillier’s $20 million settlement is the latest legal action involving ADS Inc., a Richmond-based company formerly known as Atlantic Diving Supply. The company, which received about $2.5 billion in federal contract dollars last year and had almost 450 employees as of April, has argued that it should be classified as a small business.

It has appealed an earlier Small Business Administration ruling which concluded that it was no longer a small business. In late May an SBA appeals office vacated that decision, siding with ADS, and remanded the matter to another office for further review.

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The allegations settled Tuesday did not include an admission of liability, meaning the company’s small-business status is unaffected

In a lengthy emailed statement, an ADS spokesperson said the company resolved its own portion of the same lawsuit in 2017. The statement separately said ADS and its executives are not under criminal investigation, and emphasized that Hillier “has not been a part of the company’s day-to-day operations in nearly a decade.”

“Mr. Hillier’s civil settlement relates to allegations dating back more than ten years, with the lawsuit itself filed over six years ago alleging conduct from years prior,” the ADS spokesperson said. "We are pleased that Mr. Hillier has reached an amicable resolution with the government officially putting his matter to rest, allowing him to continue his philanthropic endeavors, while ADS continues to focus on doing what we do best: supporting the U.S. military community.”

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Federal attorneys positioned the settlement as a tough enforcement action designed to protect the integrity of the procurement system.

“This action reflects the government’s steadfast commitment to hold individuals accountable who knowingly participate in schemes that take advantage of small businesses and set-aside contracts to which they are not entitled under the law,” U.S. Attorney for the District of Columbia Jessie K. Liu said in a statement.

The Justice Department had alleged that Hillier helped ADS fraudulently represent itself as a small business by misrepresenting its affiliation with a host of other companies. ADS itself settled similar allegations in 2017 for $16 million, a sum that the government called “one of the largest ever” in relation to small-business contract fraud.

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