SBA lifts GTSI suspension; CEO forced to resign

Tuesday - 10/19/2010, 1:28pm EDT

Jason Miller, Executive Editor, Federal News Radio

Click to hear the interview.

Download mp3

By Jason Miller
Executive Editor
Federal News Radio

The Small Business Administration today lifted the suspension of GTSI Corp. from government-wide contracting but without their CEO and a senior vice president.

The company announced it can return to full business with most of GTSI's existing clients and pursue new contracts with agencies, under a new agreement signed by SBA and GTSI.

Scott Friedlander, CEO and president of GTSI, and Charles DeLeon, senior vice president and senior counsel, however, agreed to voluntarily resigning as part of the lifting of suspension.

GTSI's Board of Directors chose Peter Whitfield, senior vice president and CFO, and Sandra Gillespie, a senior vice president, who leads its business capture, marketing, sales, services and supply chain organization, to replace Friedlander as co-CEOs in the interim until a new CEO is named.

GTSI is also suspending Tom Kennedy, vice president of civilian sales and general manager, Scott Schmader, senior sales manager, and Patrick Berg, program manager.

GTSI will buy back any stock options from Friedlander, DeLeon, Kennedy, Schmader and Berg.

"The lifting of the suspension gives GTSI, its vendors and clients the ability to move forward," said John Toups, chairman of GTSI's Board of Directors in a release. "The cloud of uncertainty that was hanging over our employees, creditors, shareholders and partners has been removed, and we can get back to the business of serving our government clients. We sincerely appreciate the support expressed by our vendor community, especially our credit facility partner Castle Pines Capital."

Under the agreement with SBA, GTSI will immediately stop working with small businesses serving as prime contractors, stop participating in the SBA's Mentor-Protégé program and in joint ventures with small businesses.

Toups said GTSI also will bring in a SBA-approved monitor in 15 days to report to the agency on the company's compliance with the agreement and applicable contracting laws and regulations on at least a monthly basis.

SBA suspended GTSI Oct. 1 after a Washington Post story detailed the company's dealings with Alaskan Native companies.

SBA alleged that GTSI manipulated the contracting rules to do more than 50 percent of the work awarded to Alaskan Native Corporations. Under law, small businesses must do at least 51 percent of the work under small business set-aside contracts.

The agency's Inspector General is conducting an ongoing investigation into the conduct and practices of GTSI.

In the agreement between GTSI and SBA, the agency stated, "GTSI irrevocably waives and relinquishes any defense or objection to said suspension and shall not now or at any time hereafter contest or object to said suspension or its imposition by SBA. However, SBA has determined that, based upon information currently known to SBA, GTSI's corrective actions and prospective cooperation and transparency reflected in the terms and conditions of this agreement, if fully and timely implemented and performed by GTSI, provide adequate assurance that GTSI's future dealings with the government, if any, will be conducted responsibly during the term hereof and that continuing the suspension of GTSI is not necessary at this time to protect the government's interests pending completion of the pending investigation."

The 18-page agreement details several other steps GTSI will take, including creating an ethics officer position within 15 days, adopting a written code of business ethics that must be approved by SBA and communicating and training employees on the requirements.

The company said it will continue to cooperate with the continuing investigations of its conduct as a subcontractor for certain small businesses. The continuing investigations of GTSI could result in administrative, civil or criminal penalties.

"Now that the SBA has lifted the suspension we are looking forward to getting back to helping our customers meet their mission," Gillespie said in the release. "As a result of the action taken by the SBA, we will be enhancing our compliance activities and implementing a rigorous process to regularly report to the SBA on our actions. For nearly three decades, government has come to rely on GTSI, and our employees are ready to get back to work and prove that trust was not misplaced."

(Copyright 2010 by FederalNewsRadio.com. All Rights Reserved.)