Articles Posted in Defense Industry Fraud

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USS Gerald R Ford CVN 78 Island Landing photo by Ricky Thompson

Huntington Ingalls Industries Inc. (“HII”), a military services contractor headquartered in Newport, Virginia, agreed today to a $9.2 million settlement of allegations that it violated the False Claims Act (“FCA”) by over-billing the Department of Defense (“DoD”) for labor on U.S. Navy and Coast Guard ships at its shipyards in Pascagoula, Mississippi. The lawsuit was unsealed Monday in U.S. District Court in Gulfport, Mississippi.

The labor over-billing allegations were originally raised in a lawsuit using the qui tam “whistleblower” provisions of the False Claims Act. Bryon Faulkner, a former HII employee, used the provisions of the False Claims Act that permit private individuals to sue on behalf of the government for the submission of false claims to government programs and share in any recovery.

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Shipping-ContainersTwo whistleblowers brought fraud allegations against shippers of military freight and helped the U.S. Government recover $13 million in a False Claims Act settlement announced this month. The case involved a nationwide contract described by Transport Topics Newspaper as “the largest logistics outsourcing in history.”

Richard Ricks, 58, and Marcelo Cuellar, 30, filed a complaint under the federal False Claims Act, alleging that contractors under the Defense Transportation Coordination Initiative (“DTCI”) knowingly inflated charges to the Government for shipping military freight throughout the United States.

The Defense Transportation Coordination Initiative was a massive initiative by the U.S. Department of Defense (“DoD”) to manage distribution of military freight in the continental United States. The purpose of the DTCI was to “increase the operational effectiveness of the U.S. Military and at the same time, obtain efficiencies. The premise is that DoD will increase operational effectiveness… [and] also obtain efficiencies through best business practices such as increased consolidations and mode conversions.” In effect, the DTCI was an attempt to outsource and reduce transportation costs—a fact lost on the fraudulent contractors. In 2015, the program was abandoned because of rampant fraud.

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The-Pentagon-150x150 2The United States Department of Justice filed a False Claims Act (“FCA”) complaint against DynCorp, International alleging that the company overcharged the federal government to train Iraqi police forces.  DynCorp, which is headquartered in McLean, Virginia, is a large logistics, transportation, and military-services subcontractor and is used extensively by the U.S. government and foreign governments to transport and provide goods and services to combat zones.

In an FCA suit, individuals (“whistleblowers”), file lawsuits on behalf of the government with allegations that fraud has been committed against a federal government program.  Whistleblowers, if successful, are entitled to share in any recovery received by the government.  Here, the government filed a suit on its own behalf.

In April 2004, the State Department’s Bureau for International Narcotics and Law Enforcement Affairs awarded a contract to DynCorp to provide training for local police in Iraq.  The contract included appropriations for other services needed to support the recruitment of officers—trainers, guards, translators, vehicles, and living quarters for contractor personnel.

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Camp-Lejeune-jpgRicky Howard, a former employee of a California construction company that did work on domestic military bases, will receive $1.48 million dollars for his information regarding fraudulent billing practices. Howard has worked in the masonry trade his entire career, and was employed by Harper Construction Company (“Harper”) when he discovered the company’s frauds on the government.

Earlier this month, the U.S. Attorney for the District of Southern California announced that Harper has paid $5.4 million dollars to resolve allegations that it “up-charged” the U.S. government for its work on Camp Pendleton and Camp Lejeune and fraudulently created “sham” companies to fulfill government contracting requirements.

Harper Construction is ranked among the Top 400 construction companies, the Top 100 Design Build Firms, and the Top 100 Green contractors in the United States. It is the second largest privately-held company in San Diego, California. It reported revenues in 2010 of approximately $360 million.

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On Tuesday, the Supreme Court decideSupreme-Court-300x198d unanimously on two issues: first, that the Wartime Suspension of Limitations Act (WSLA) applies only to criminal charges and not to civil claims; second, that the first-to-file bar does not apply to new claims once a previous claim has been dismissed. The suit brought forward by whistleblower Benjamin Carter against Kellogg Brown & Root Services, Inc. (KBR) alleged that KBR had fraudulently billed the Government for work they did not perform during the Iraq War. The Court’s holding will in some circumstances reduce the amount of time whistleblowers have to bring a claim under the False Claims Act, but will also allow whistleblowers to bring new claims that contain similarities to prior dismissed suits. Continue reading

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Whistle 2An Illinois federal court rejected IBM Corporation’s (“IBM”) motion to dismiss a relator’s False Claims Act case accusing it of conspiring with other companies to submit approximately $50 million worth of fraudulent claims for a U.S. Department of Homeland Security (“DHS”) emergency response project. Although it went awry, “Project Shield” was to provide emergency response vehicles with mobile platforms to instantly connect them to a central database in the event of a terrorist attack or natural disaster. Relator Michael McGee filed the complaint on behalf of the federal government and the state of Illinois after his company, Responder Systems, LLC, was solicited and hired as a subcontractor to fix the mobile platforms’ functionality issues. IBM had argued in its motion for dismissal that news reports about the project and a federal audit bar McGee’s claims through the public disclosure provision of the Act. But the court determined that McGee was in fact an original source of the information, having direct and independent knowledge of the alleged fraud that he shared with government officials prior to filing the complaint. Continue reading

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Iraq-TankA recent ruling by the Fourth Circuit has put the False Claims Act allegations made by Frank Skinner, a former executive of Armet Armored Vehicles Inc. (“Armet”), back in play. According to a federal district court in Virginia, the Circuit’s decision in Badr v. Triple Canopy Inc. has amounted to a change in the law that now allows the government to bring “implied certification” claims when a contractor withholds information about any non-compliance with its contractual obligations. Accordingly, the court denied Armet’s motion to dismiss in its entirety. The company is alleged by Skinner to have defrauded the federal government by supplying U.S. forces in Iraq with substandard gun trucks. The now defunct company designed, manufactured, and supplied armored vehicles for government and commercial customers. It was headquartered in Miramar Beach, Florida, but also had offices in Danville, Virginia, and Ontario, Canada. Continue reading

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facts-among-untruths-300x234 2The Fifth Circuit Court of Appeals has revived the federal government’s False Claims Act case against Bollinger Shipyards, Inc. (“Bollinger”) in connection with a contract under which Bollinger was to modify eight vessels owned by the United States Coast Guard (“Coast Guard”). The $78 million in modifications ultimately rendered the vessels unseaworthy because Bollinger allegedly fraudulently miscalculated the hulls’ resistance to bending. The company had allegedly run three different calculations with false inputs and submitted the highest one to the Coast Guard. Bollinger also allegedly declined outside review of the calculations that it had made into preserving the integrity of the ships because of concerns that the review would reveal problems. Bollinger Shipyards specializes in new construction, steel fabrication, vessel repair, and conversion of a wide variety of Coast Guard and military vessels and commercial offshore and inland vessels. The company currently operates ten shipyards, all of which are located throughout South Louisiana and Texas. Continue reading

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Bag-of-money-300x300 2Yesterday, a federal judge in Illinois refused to dismiss the majority of a relator’s allegations brought under the False Claims Act against Northrop Grumman Corporation (“Northrop”). The complaint alleges that the global security company and one of the largest defense contractors in the world defrauded the federal government in connection with a program designed to create technology to protect commercial aircraft from missile attacks. The program was initiated after two shoulder-fired missiles almost hit an Israeli commercial airline taking off from Kenya. The Counter-Man Portable Air Defense System Development and Demonstration Program (“Counter-MANPADS”) would allegedly be used to as a way to protect civilian airplanes from terrorist attacks. But, under its “best efforts” contract with the government, Northrop allegedly fraudulently represented that it was doing its best to complete tasks in order to falsely collect payments for project milestones.

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Fighter-JetThe U.S. Department of Justice announced on Friday that the Boeing Company (“Boeing”) has agreed to pay $23 million to the federal government to settle allegations made by a number of relators that the aerospace and defense industry giant submitted false claims for labor charges in connection with its contracts with the U.S. Air Force to maintain, repair, and modify the C-17 Globemaster aircraft. Boeing is the world’s largest combined manufacturer of commercial jetliners and military aircraft and the world’s second largest defense company. The C-17 Globemaster aircraft, which is both manufactured and maintained by Boeing, is one of the military’s major systems for transporting troops and cargo throughout the world. The whistleblowers will collectively receive $3.9 million for their role in the litigation. The settlement came as a result of the unsealing of the complaint and the government’s election to intervene in the case. Continue reading