Maryland data center contractor, former CEO settle SEC fraud allegations for $1.8 million

AiNET Corp. and its former chief executive officer, Deepak Jain, have agreed to pay $1.8 million to settle allegations that they violated the False Claims Act by knowingly submitting false claims for data center services provided under a contract with the U.S. Securities and Exchange Commission, the Justice Department announced. AiNET operates a data center in Beltsville, Maryland.

The settlement resolves allegations that AiNET and Jain fraudulently induced the SEC to enter into the contract by falsely certifying that the company’s data center met at least Tier III standards under the Telecommunications Industry Association’s TIA 942 Standards for Data Centers, as required by the contract. The United States alleged that the data center failed to meet those standards.

The government further alleged that AiNET and Jain falsely certified to the SEC that experts from an entity called UpTime Council had inspected the facility and determined that it met Tier IV standards under TIA 942. The government alleged that those certifications were false because UpTime Council was not an operating company and never inspected the AiNET data center.

Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division said companies doing business with the government must act fairly and honestly, adding that the department will continue pursuing contractors that knowingly fail to provide required services to federal agencies.

SEC Inspector General Kevin Muhlendorf said protecting taxpayer dollars is a priority for his office, crediting SEC OIG investigators and auditors for their work holding contractors accountable in partnership with the Justice Department.

The department noted that this year the administration launched the Task Force to Eliminate Fraud and the National Fraud Enforcement Division to enhance efforts against fraud, waste and abuse in federal programs. The department said the Civil Division’s False Claims Act enforcement work is central to those efforts, recovering billions of dollars for taxpayers and holding wrongdoers accountable, and will continue to support the task force and division’s missions.

The resolution resulted from a coordinated effort involving the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, and the SEC’s Office of Inspector General. Senior Trial Attorney Greg Pearson of the Fraud Section handled the matter, according to the department.

The Justice Department emphasized that the claims resolved by the settlement are allegations only and that there has been no determination of liability.