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University Loft accused of overbilling military for canceled furniture order

August 21, 2017

University Loft Co. was sued Friday by the federal government, which accused it of overbilling the U.S. Army Corps of Engineers in a contract involving furniture intended for a U.S. Army training center.

The complaint seeks more than $800,000 in damages and penalties from Greenfield-based University Loft, one of the nation’s biggest suppliers of college dorm room and military base furniture.

The complaint is filed under the U.S. False Claims Act because the government accuses University Loft of knowingly making a fraudulent claim for payment.

In an email to IBJ on Sunday, University Loft owner James Jannetides said he had been unaware of the lawsuit.

“We will be happy to cooperate in every way we can with our government and all their agencies,” he wrote. “University Loft is proud to serve the men and women of our armed services.”

According to the lawsuit, J-Squared Inc., which does business as University Loft, received a contract with the Corps of Engineers in April 2014 to supply beds, desks, chairs and other furniture to Fort Jackson in South Carolina.

Less than two weeks later, the agency issued a stop-work order when it was tipped off by a University Loft competitor that the furniture in the contract might be non-compliant with agency specifications.

Two months later, the agency asked University Loft to submit an estimate of costs it incurred before the stop-work order was issued.

University Loft initially submitted an invoice for $265,486, but later sent another invoice for $333,233 to a different office at the agency. The agency paid the costlier invoice.

Later, however, the agency analyzed a cost breakdown submitted by University Loft and found the company included a purchase order from supplier Beijing Ofmart Furniture Co. for $265,486.

The complaint alleges University Loft had canceled the order from Beijing Ofmart Furniture Co. when it received the stop-work order. But according to the suit, it still charged the Army Corp of Engineers for the furniture, leading to an overbilling of $265,486.

The False Claim Act allows the government to receive triple damages, plus civil penalties, in fraud that results in financial loss.

The act also allows whistle-blowing competitors to collect some of the damages collected when the government wins cases.  

In this case, it’s unclear if another business would be eligible to receive any damages.

University Loft, founded in 1986, has had previous experience with both sides of the False Claim Act, as well as previous trouble over military contracts.

In 2009, the company agreed to a $400,000 settlement with the Justice Department over selling Malaysian furniture to military bases, in violation of the Trade Agreements Act. University Loft said it had obtained permission to ship directly to the bases, but government lawyers maintained that was still a violation.

California-based Furniture by Thurston got to keep $66,000 of the settlement because it launched the inquiry.

In July 2010, federal agents raided the company’s Hancock County headquarters, spending hours seizing records. Officials from the Department of Defense and the Air Force took part in the raid. The raid did not result in charges or other actions.

In 2015, University Loft was awarded $2.25 million for blowing the whistle on a Dallas-based competitor that failed to pay duties on furniture imported from China.

It also collected $1.3 million from a settlement in a separate unfair-competition lawsuit it filed in Texas state court against the Dallas company, University Furnishing LP.

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