Armed Forces Service Corp. Pays More Than $4.3M To Settle Claims

ALEXANDRIA, VA — An Alexandria-based Armed Forces Services company has agreed to pay more than $4.3 million to resolve allegations that three former executives with the company accepted kickbacks in exchange for awarding subcontracts on federal government contracts, federal prosecutors announced Wednesday.

The corporation, which also was known as Magellan Federal, agreed to pay $4,342,651 to settle the matter in a hearing on Wednesday, according to Raj Parekh, the acting U.S. Attorney for the Eastern District of Virginia.

Federal prosecutors alleged that between 2010 and 2015, a former Armed Forces Services Corporation executive directed a subcontractor to mark up the cost of services that the subcontractor was providing to AFSC for various Wounded Warrior projects, according to a news release.

The executive then ordered that the subcontractor to divide the proceeds of the scheme between the subcontractor, the former executive and two other company executives in exchange for the awarding of the subcontracts.

AFSC’s current ownership submitted a written contractor disclosure to the U.S. Small Business Administration describing potential kickbacks to the former executives and cooperated in full in the ensuing investigation, the news release stated. The settlement resolves federal civil claims under the Anti-Kickback Act and the False Claims Act.

The civil claims settled by the settlement agreement are allegations only; there has been no determination of civil liability.