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GS Foods Group Inc. has agreed to a nearly $950,000 settlement with the federal government after allegedly securing contracts meant for small businesses despite not meeting the eligibility requirements. The California-based food distribution company reached the agreement Wednesday, resolving claims that its subsidiaries improperly bid on contracts reserved for small businesses under the False Claims Act.

Contract Bidding Under Scrutiny

According to the U.S. Department of Justice (DOJ), GS Foods' subsidiaries, GoodSource Solutions and Dori Foods, pursued government contracts between Oct. 1, 2018, and March 8, 2024, to supply food to federal facilities operated by the Bureau of Prisons and U.S. Immigration and Customs Enforcement. However, GS Foods did not qualify as a small business during this period due to its affiliation with “certain other companies,” making the bids ineligible.

“Businesses that participate in federal small business contracting programs must ensure that they comply with applicable rules and regulations relating to eligibility,” said Brett A. Shumate, acting assistant attorney general of the DOJ’s Civil Division.

Self-Reporting and Compliance Measures

The DOJ noted that GS Foods proactively disclosed the issue, cooperated with investigators, and provided key documents and witnesses. The company also implemented corrective measures, including updating its code of conduct and establishing a compliance management committee led by a newly appointed chief compliance officer.

“When businesses run afoul of small business contracting requirements, they can mitigate the consequences by making timely self-disclosures, cooperating with investigations, and taking appropriate remedial measures,” Shumate added.

While GS Foods has settled the case, company representatives declined to comment further on the matter Thursday.