$700,000 Settlement by Fullerton Firm

Covington Development Group Inc., a construction firm, has agreed to pay $700,000 to settle a federal lawsuit alleging that a former company subsidiary falsely passed itself off as a small business to win a construction contract in the early 1980s.

The contract to build barracks at California military bases was supposed to go to a company meeting the government’s definition of a small business, Covington Vice President George Reinhardt said Friday.

The government suit, filed in 1989, alleged that the subsidiary, Covington Constructors, formed a joint venture with a small business to get a piece of the government job.

Reinhardt declined to comment on the settlement except to say: “We didn’t want the cost or the bad publicity that would come from fighting the lawsuit, so we settled. The government said we shouldn’t have been involved in the contract.”

Covington Constructors was discontinued in 1985, Reinhardt said.

Fullerton-based Covington Development will pay the settlement amount over an unspecified period, Reinhardt said, and the payment will be recognized in the company’s financial statements for the year ended Dec. 31.

Publicly held Covington Development is a builder of homes and housing components.