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Washington, DC — Paragon Systems, Inc., a leading provider of security services for the federal government, will pay $53.68 million to resolve allegations of misconduct. This settlement includes $52 million in payments and $1.68 million in interest as part of a whistleblower lawsuit filed under the False Claims Act by a Phillips & Cohen LLP client. In a related agreement, Athena Services International, LLC (ASI), Athena Joint Venture Services, LLC (AJVS), and their owner, Alisa Silverman, settled by paying $1.66 million. The lawsuit, initiated in 2021, gained the U.S. Department of Justice’s involvement in August 2024.
Fraudulent Use of Small Business Contracts
The settlement addresses allegations that Paragon, a subsidiary of Swedish multinational Securitas, misused government programs intended for small businesses, including those owned by veterans, women, and disadvantaged groups. Paragon allegedly partnered with businesses controlled by friends and relatives of its executives to obtain Department of Homeland Security (DHS) contracts set aside for small businesses.
For example, a purported small business named Praetorian was founded by the wife of a Paragon Vice President, who used a combination of her middle and maiden names to disguise her identity. Another figurehead business leveraged an elderly service-disabled veteran as its nominal owner to qualify for contracts, despite Paragon executives maintaining operational control. These misrepresentations allowed Paragon to secure contracts for which it was not eligible, sidelining legitimate small businesses.
Anti-Kickback Act Violations
Paragon Systems, along with ASI, AJVS, and Ms. Silverman, also faced accusations of violating the Anti-Kickback Act. The government alleged that over $11 million in kickbacks were funneled through shell companies formed by Paragon executives. These payments were falsely documented as “consulting services,” although internal communications described them as “distributions.” The kickbacks were ultimately included in the contract costs charged to DHS, further defrauding taxpayers.
“Paragon engaged in fraud to obtain contracts intended for small businesses, depriving legitimate small businesses of a fair and competitive bid process,” said John Tremblay, a partner at Phillips & Cohen.
Whistleblower Todd Pattison Exposes Fraud
The whistleblower, Todd Pattison, serves as the CEO and President of MaxSent, a security services company for government facilities and transportation hubs. Pattison uncovered the fraudulent practices while investigating Paragon’s joint venture activities in southern New Jersey. He revealed that Paragon used proxies like ASI and AJVS to manipulate small business set-aside contracts, securing work for which it was not eligible.
“Government funds intended by Congress to be awarded to small businesses were instead diverted to a multinational conglomerate,” said Peter Chatfield, a whistleblower attorney with Phillips & Cohen. “We are proud to represent the whistleblower and recognize his extraordinary bravery.”
Record Recovery for Small Business Fraud
This case represents the largest recovery under the False Claims Act involving small business set-aside fraud. The settlements also extend to further legal actions against other entities, including Patronus Systems, Inc. and Patronus Systems Partners, LLC, for similar allegations.
The False Claims Act allows private citizens to expose fraud against the federal government and pursue legal action on its behalf. Whistleblowers are protected against retaliation and are entitled to 15 to 25 percent of recovered funds when the government intervenes, as it did in this case.
2 Responses
Were there any criminal charges for these execs?
If so, what were the charges?
If not, why weren’t they charged?
First-thank you Mr. Pattinson. If it wasn’t for you, this scheme would not have been uncovered by the government.
This is a great first step, however this company and its affiliated organizations should not be allowed to do business with the federal government .
Now that the government is aware of such schemes what if anything can or will be done to ensure that this is the only company engaged in such activities?
This large Swedish subsidiary essentially took business from American VOSB’s and other small businesses from contracting opportunities.
Perhaps this is something the new administration should investigate.