ReadyOne Agrees to $5 Million False Claims Act Settlement

ReadyOne Industries, Inc. has agreed to a settlement of $5 million related to a qui tam lawsuit alleging the company committed False Claims Act violations. According to the Department of Justice, ReadyOne knowingly and willingly submitted false certifications to a federal agency regarding labor hours for employees with severe disabilities. The fraudulent reports were used to obtain millions of dollars in federal manufacturing contracts for the factory.

The alleged False Claims Act violations occurred between the years of 2000 and 2006, when Bob Jones was the company’s president and chief executive officer. ReadyOne, who previously operated under the name National Center for Employment of the Disabled (NCED), manufactures various types of apparel, boxes and other products.

ReadyOne participated in a federal program known as AbilityOne, which provides job opportunities to people who are blind or have other severe disabilities. AbilityOne helps these disabled workers by finding jobs with with the federal government. For example, the Department of Defense is the largest customer of the AbilityOne program, allowing thousands of disabled workers to provide a government service and earn a paycheck.

In order to participate in the AbilityOne program, ReadyOne was required to ensure and certify that 75 percent of all the direct labor hours on their government contracts were performed by employees who were severely disabled or blind. From 2000 to 2006, ReadyOne allegedly employed a large number of workers who were not disabled, putting them to work on federal contract jobs to manufacture boxes, military clothing and other items. According to the DOJ, ReadyOne failed to report any hours worked by non-disabled employees and then submitted false certification of these hours to the AbilityOne Committee.

Whistleblower for the Qui Tam Lawsuit

The whistleblower, Michael Ahumada, filed a qui tam lawsuit against ReadyOne in 2006. In February 2004, Ahumada was the acting general manager and vice president of ReadyOne’s corrugated packaging division. Bob Jones fired Ahumada during July 2004 after he voiced concerns about the fraudulent AbilityOne activity, including the fact that company officials had falsified information in order to gain federal contracts.

After Ahumada was fired by Jones, he consulted with a False Claims Act attorney and reported ReadyOne’s misconduct to the federal government. Ahumada stated that he had information which would prove that ReadyOne violated the False Claims Act by falsifying certification data, claiming it met the 75 percent disabled worker requirement. Ahumada made other allegations in his qui tam lawsuit, including charges that ReadyOne received thousands of dollars in rebates that were not reported to the federal government

The DOJ made a decision to intervene only in the allegations related to the false certifications submitted by ReadyOne concerning the number of disabled workers employed at the facility.

The Bob Jones Era

As one of El Paso’s former entrepreneurs of the year, Robert E. “Bob” Jones, turned the ReadyOne factory into one of the city’s largest employers. Jones and a co-defendant were both accused of falsifying documents on at least seven occasions in an attempt to meet the AbilityOne program requirements, when in fact, disabled workers performed only a small portion of the work. The False Claims Act violations allowed ReadyOne to secure $700 million in additional no-bid government contracts that are specifically set aside for disabled workers.

Jones voluntarily resigned his position with ReadyOne on March 6, 2006 and plead guilty to multiple fraud charges in 2009. In 2011, a federal judge sentenced him to 10 years in federal prison and also ordered him to pay $68 million in restitution.

ReadyOne Industries agreed to pay a $5 million federal settlement in order to resolve allegations of violating the False Claims Act.

“We agreed to it (settlement) because we want to get this behind us. This happened in the Bob Jones era and the problems no longer exist,” said Leonard “Tripper” Goodman, an El Paso businessman who has been the chairman of ReadyOne’s board of directors since Jones’ departure in March 2006.

The $5 million fine will be paid back using ReadyOne revenue over a five year period.