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Probe finds personal ties, old injury aided IRS contractor

Jun. 25, 2013 - 06:00AM   |  
By JIM McELHATTON   |   Comments
Strong Castle Inc., decertified as a HUBZone contractor, is in Washington's Chinatown section, in the red brick building second from left.
Strong Castle Inc., decertified as a HUBZone contractor, is in Washington's Chinatown section, in the red brick building second from left. (Tom Brown/Staff)

A high school injury nearly three decades ago enabled the owner of a contracting company to claim service-disabled veteran status last year, opening the door to contracts worth up to a half-billion dollars, a House investigation has found.

Braulio Castillo, owner of Signet Computers, which has been renamed Strong Castle, injured his ankle in fall 1984 during his year at the U.S. Military Academy Preparatory School, but would play quarterback and linebacker the next year at the University of San Diego, according to a 157-page report Tuesday by the House Oversight and Government Reform Committee, which will hold a hearing on the contract Wednesday.

The report said high school football players recruited to play at West Point sometimes enroll in the prep school for a fifth year of high school to “redshirt” and prepare to play college football. Castillo’s injury happened during an orienteering exercise, and his nine months at the prep school represent the entirety of his military career, according to the report.

Still, 27 years later, soon after Castillo purchased a government contracting company, he filed a claim with the Veterans Affairs Department seeking compensation for a service-related disability, investigators found.

Once approved, the disability enabled Castillo’s company access to government set-asides through VA’s Service-Disabled Veteran-Owned Small Business program.

Castillo told a VA examiner weighing the company’s application for entry into the set-aside program about the “crosses I bear due to my service to our great country,” according to the report.

He later told congressional investigators that his injury was debilitating over the years and that he’d had three foot fusions. Had Castillo completed his year at the preparatory school without injury, he wouldn’t have been considered a veteran, but a VA official told House investigators that cadets injured at school become veterans due to service-connected disability, the report said.

The House report also found Castillo’s newly purchased company had no experience with the IRS, but it still won lucrative information technology contracts worth up to $500 million in part because of its status as a HUBZone contractor and Castillo’s relationship with a top IRS contracting official.

Under Small Business Administration rules, a HUBZone, or Historically Underutilized Business Zone, designation gives contractors an edge in competing for federal work if they’re based in certain economically distressed areas.

The SBA revoked Strong Castle’s HUBZone status in May, but it declined to disclose why, saying the decertification letter contains confidential business information.

The House report, however, said the company provided “inaccurate, unreliable and misleading information” to SBA. In a statement to Federal Times before the report was released, company said it disagreed with the SBA ruling.

The House probe also found that as Strong Castle sought IT work within the IRS, Castillo turned to a personal friend in the tax agency for advice: Greg Roseman, deputy director of IT procurement.

The House report called the relationship between Roseman and Castillo “cozy.”

Among thousands of pages of documents, House investigators uncovered dozens of text messages between Roseman and Castillo.

“Text messages … show that Castillo and Roseman had a long-term friendship that extended well beyond a professional relationship,” the report said, adding that many of the messages were vulgar.

Investigators also found a February 2012 email from Roseman to Castillo in which Roseman provided the name of a supervisory contract specialist at the General Services Administration, where Roseman previously worked, who could help Castillo get a contract on GSA’s Schedule 70, a catalog of governmentwide contracts for information technology products and services. In the email, Roseman told Castillo, “I’ve talked to her and she will look into expediting.” The House investigation report said the GSA official “knew that the application was a priority for Greg Roseman.”

Before the report, Federal Times previously sought to interview Roseman and submitted questions to the IRS, which did not respond. Inquiries to Castillo about his military experience also were not returned.

Castillo’s company was placed on Schedule 70 after 50 days, while the average wait is 114 days, the report said.

“Greg Roseman’s relationship with Braulio Castillo was invaluable in helping Strong Castle win numerous contracts potentially worth hundreds of millions of dollars,” the report concluded. “Given its limited track record and lack of prime contracting experience in the federal government, Strong Castle likely would not have won the contracts.”

Castillo said in a statement after the report’s release that his company had worked closely both with the SBA and VA, calling Strong Castle “a small business that delivers high quality IT products and services to the federal government.”

“Throughout our work with the IRS, we have never received any improper preferential treatment, and have competed fairly for every contract we have received,” Castillo said. “We are confident that the record will ultimately show that our company has committed no wrongdoing.”

Meanwhile, Rep. Darrell Issa, R-Calif., chairman of the House Oversight and Government Reform Committee, sent a letter to an attorney for Roseman Tuesday saying the IRS official should appear at Wednesday’s House hearing, even if he does plan on invoking his Fifth Amendment privilege against self incrimination.

Roseman’s lawyer, Roscoe Howard Jr., who served as U.S. attorney for the District of Columbia from 2001 to 2004, was not immediately available Tuesday.

In a statement Tuesday, Issa said, “By inappropriately using a personal relationship and abusing a provision designed to help disadvantaged businesses, the IRS and Strong Castle have made a mockery of fair and open competition for government contracts.”

The House investigation and SBA ruling against Strong Castle mark a sharp turn of fortunes for the contracting company, which the Treasury Department last year named as its small-business prime contractor of the year.

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