The Small Business Administration's Office of Hearings and Appeals has knocked Apnea Care, Inc. off a Department of Veterans Affairs home-oxygen contract, ruling that a service-disabled veteran who owned 51 percent of the company's stock did not actually control it. In decision SBA No. VSBC-480-P, OHA sustained status protests filed by Panakeia, LLC and Warrior Service Co., LLC, and found Apnea ineligible for the set-aside because the veteran's majority shares were pledged against a $3 million note and a non-veteran executive kept veto power over hiring, spending, and the firm's product lines.
Background
The contract at issue is VA Home Oxygen Services for Veterans Integrated Service Network 2, Solicitation No. 36C24225R0013, a set-aside for service-disabled veteran-owned small businesses. To win and keep such an award, a firm must satisfy the SBA's ownership and control regulations at 13 C.F.R. Part 128: a service-disabled veteran must both own at least 51 percent of the concern and control it, meaning the veteran holds the long-term decision-making authority and runs day-to-day operations.
Ownership and control are separate tests, and the second is where SDVOSB status protests are most often won and lost. A veteran can sit on the cap table with a comfortable majority and still fail if the paperwork lets someone else make the decisions that matter. That is precisely the gap Panakeia and Warrior Service pried open. When two competitors on the same procurement challenge a winner's status, OHA reviews the corporate documents that actually govern the company, not the label on the bid.
Home-oxygen work is a steady, high-volume VA line of business, and VISN 2 covers a large stretch of upstate New York, so the award carried real recurring revenue. That raises the stakes for every bidder and gives disappointed competitors a strong incentive to comb through the winner's corporate records the moment an SDVOSB set-aside is awarded to a firm assembled through an outside financing deal.
Key Details
Service-disabled veteran Christopher Camp acquired 51 percent of Apnea Care's stock through a stock-sale agreement dated January 1, 2025. On paper that made him the majority owner. The financing behind the purchase is what unraveled the claim. Camp bought the shares with a $3 million promissory note calling for 60 monthly payments of $56,613, and the shares themselves were pledged as collateral for that note. His voting rights were conditioned on staying current on the payments, meaning a missed installment could strip the veteran of the very votes that were supposed to prove his control.
The shareholder agreement layered further limits on top of the financing. Non-veteran Francis Fermoile retained the "exclusive right" to authorize check-signing above $1,000, to incur debt over $30,000, to change employment status, and to decide on insurance and product lines. Several core corporate actions -- amending the charter, issuing stock, and altering compensation -- required unanimous shareholder consent, which handed the minority a blocking vote over the majority.
OHA found that arrangement fatal to the control test. The decision zeroed in on Fermoile's authority over personnel, stating that "Mr. Fermoile thus alone has the right to change Mr. Camp's employment, which means he is exercising control over the SDV." A veteran whose own job status sits in a non-veteran's hands cannot be said to control the company. OHA found even stronger proof of that dynamic in Apnea's own April 14 filing, which explained that Camp's management authority "had to be restricted" until the firm decided to bid, an admission the judge read as showing Apnea's real management had structured the deal to look eligible on paper. OHA held that the structure violated 13 C.F.R. Sections 128.202(b) and 128.203(h)(1)(i), granted both protests, and found Apnea Care ineligible for the award.
The ruling reads the ownership and control regulations exactly as written. Camp's 51 percent was real, but the note that financed it, the pledge that secured it, and the veto rights that surrounded it left the operative decisions with Fermoile. Majority ownership on the stock ledger did not translate into the unconditional authority the rules demand.
What It Means for Contractors
The decision is a warning to any SDVOSB assembled through seller financing or an investor-negotiated shareholder agreement. Two structures that felt routine to the parties -- a promissory note secured by the veteran's own shares, and a set of consent rights carved out for a non-veteran partner -- each independently undercut the veteran's control. Firms relying on either should assume a competitor will read the same documents OHA did.
The first trap is financing that conditions voting rights on payment. When a veteran's shares are collateral and the votes attached to them can lapse on a missed installment, the veteran does not hold unconditional control. A cleaner path keeps voting rights fixed and severs them from the debt, so that a payment dispute cannot suspend the majority owner's authority. Any pledge that lets a lender or seller claw back votes should be treated as a status risk, not just a financing term.
The second trap is the veto. Supermajority or unanimous-consent provisions, and "exclusive right" clauses reserving spending, hiring, or product decisions to a non-veteran, hand negative control to the minority. OHA has repeatedly held that the power to block ordinary business actions is itself a form of control incompatible with SDVOSB eligibility. Thresholds as specific as a $1,000 check-signing limit or a $30,000 debt ceiling are enough to move the decision away from the veteran. Contractors should audit their operating and shareholder agreements for any clause that lets a non-veteran stop the majority owner from acting, and reserve unanimity for genuine extraordinary events such as dissolution rather than day-to-day management.
The broader lesson is that eligibility turns on the governing documents, not the ownership percentage a firm advertises. A 51 percent stake is the floor, not proof of control. Before bidding a set-aside, contractors should have counsel test the stock-purchase note, the pledge terms, and every consent right against the Part 128 control standard, because status protests are decided on exactly those instruments. Fixing the paperwork before award is cheap; losing the contract after a protest, as Apnea Care did, is not. Firms structuring a veteran buy-in should build the transaction to survive the read a rival will inevitably give it.
