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2. Mentor Protégé Program In addition to the Section 8(a) program, the SBA also administers a Mentor-Protégé program, which allows a non-Section 8(a) company to form a joint venture with a Section 8(a) eligible company. The program is designed to encourage an 5 approved mentor, that is not a Section 8(a) concern, to provide managerial, financial, and technical assistance in order to improve a protégé’s ability to bid on and compete for government contracts. See 13 C.F.R. § 124.520(a)-(b). The protégé must be in the development stage of participation in the Section 8(a) program, have never received an 8(a) contract, or have a size that is half the size of the corresponding NAICS code. Id. § 124.520(c). In order to participate in the program, a mentor and protégé must submit their joint venture agreement to the SBA for approval. Id. § 124.513(a)(1). The Section 8(a) participant must be the “managing venturer” of the joint venture, and an employee of the Section 8(a) concern must be designated as the project manager responsible for overall contract performance. Id. § 124.513(c)(2). Where the “8(a) concern brings very little to the joint venture relationship in terms of resources and expertise other than its 8(a) status, SBA will not approve the joint venture agreement.” Id. § 124.513(a)(2). The applicable regulations specifically provide that “[n]o determination of affiliation or control may be found between a protégé firm and its mentor based on the mentor/protégé agreement or any assistance provided pursuant to the agreement.” Id. § 124.520(d)(4).

B. Factual Background 6 LB&B is a North Carolina company that has its principal place of business in Columbia, Maryland. It was certified by the SBA as a Section 8(a) concern on April 6, 1995. This certification was based on the status of President Lily Brandon, who is an Asian Pacific American. Relators’ Compl. ¶¶ 7, 29; Gov’t Compl. ¶ 12. Both Relators were employed at LB&B -- Steven O. Sansbury was employed as an Operations and Maintenance Institutional Planner from 2000 until his separation from the company in 2003, Relators’ Compl. ¶ 4; James Buechler was employed as an Assistant Project Manager at the FDA from July 2003 until August 2005, Id. ¶ 5. 1. Allegations in the Government’s Complaint in Intervention2 LB&B was incorporated in 1992. Govt. Compl. ¶ 28. Initially, the Board of Directors of the company had six members, only two of whom were socially and economically disadvantaged: Ms. Brandon and her son, F. Edward Brandon Jr. Relators and the Government allege that neither possessed sufficient skills or experience to run a company engaged in LB&B’s main lines of business -- government contracts, manufacturing, facilities management, and government services. Id. ¶¶ 29-30. Three of the other directors, including Defendant 2 These allegations relate to claims made in both the Relators’ complaint as well as in the United States’ complaint in intervention.

7 F. Edward Brandon, Ms. Brandon’s husband, had extensive experience in government contracting and the other lines of business. Id. ¶ 31. Despite her alleged lack of experience, Ms. Brandon was selected as the president of the company. Moreover, though she contributed substantially the same amount as the other directors, Ms. Brandon’s financial contribution was treated as equity and she was given 51 percent of the company’s stock. Id. ¶¶ 33-34. In 1994, prior to applying for Section 8(a) certification, all of the directors of the company except for Ms. Brandon officially resigned, though they stayed on as employees with the same titles and salaries as before their resignations. Id. ¶¶ 35-37. The Government alleges that two of the original directors sold their stock to Ms. Brandon at this time at the share price set at the time of the company’s formation despite the fact that the company had grown in the interim. As a result of this sale, Ms. Brandon acquired an 81 percent interest in the company. Id. ¶ 39. On December 28, 1994, LB&B initially applied for Section 8(a) certification. The Government alleges that there were a number of misrepresentations on the initial application.

For instance, Ms. Brandon’s salary was listed as $64,000 and Mr. Brandon’s total compensation was listed at $42,500. According to the Government, Ms. Brandon’s salary was actually $13,692.16 8 while Mr. Brandon’s total compensation was $18,126.60. Because Mr. Brandon’s salary allegedly exceeded that of Ms. Brandon, LB&B would have been ineligible to participate in the Section 8(a) program. Id. ¶¶ 43-47.

Further, on its application, LB&B represented that Ms. Brandon would be responsible for the day-to-day operation of the company and described Mr. Brandon’s role as limited to assisting the president. Id. ¶¶ 48-49. However, the Government alleges that Ms. Brandon had “no meaningful substantive role” in the daily operations of the company, and did not: (i) make specific decisions regarding bidding on new business; (ii) oversee [LB&B’s] performance of its government contracts . . . ; (iii) play any substantive role in the negotiation and formulation of [LB&B’s] government contracts; (iv) set and enforce expectations for the company’s general managers; (v) formulate specific company practices regarding collective bargaining and interactions with unions; or (vi) oversee the financial performance of [LB&B] on its government contracts.


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