Archive for the ‘Defense Industry’ Category

Supplier of Food to U.S. and Coalition Troops in Afghanistan Pays $389.300,000 in Civil Damages, Criminal Fines and Penalties; Pleads Guilty to Major Fraud, Conspiracy, Other Charges

Monday, December 8th, 2014

On behalf of their client Michael Epp, the law firms Morgan Verkamp LLC (Cincinnati) and Pietragallo Gordon Alfano Bosick & Raspanti, LLP (Philadelphia) note the settlement of claims initiated by Mr. Epp alleging fraud on the part of Supreme Foodservice, the “prime vendor” of food and related items to the Department of Defense and coalition troops in Afghanistan from 2005 until at least 2009.

Under agreements finalized today between Supreme Foodservice GmBH, Justice Department lawyers in Washington, D.C. and Philadelphia, and Mr. Epp, Supreme will pay the United States $101,000,000 in damages under the False Claims Act. Supreme Foodservice GmBH and related entities have entered guilty pleas to charges of major fraud, conspiracy to commit major fraud, and wire fraud. The criminal plea agreements require payment of $288,300,000 in fines and restitution, making the total recovery on the prime vendor contract $389,300.000. The allegations are detailed in a criminal Information filed this morning in U.S. District Court in Philadelphia.

“We believe this is the largest fraud recovery against any contractor relating to the Afghanistan and Iraq wars, the largest recovery in a military procurement case initiated by a qui tam whistleblower, and one of the largest fraud recoveries against any defense contractor,” said Frederick Morgan, one of Mr. Epp’s attorneys. “That the defendants pled guilty to major fraud is testament to the tenacity of the federal prosecutors and the strength of the evidence.”

Mr. Epp’s civil complaint, brought in March 2010 under the qui tam provisions of the United States Civil False Claims Act, alleges in part that Supreme Foodservice used a shell corporation to inflate the cost to the government of produce served to the troops; illegally increased the cost of bottled water by misrepresenting acquisition costs; and obtained kickbacks from vendors disguised as “prompt payment” discounts. Mr. Epp is a German citizen who worked for Supreme in Dubai, where its Prime Vendor operation was based. Such contracts are used by the military to allow it to purchase all needed food and beverage items from a single company, which procures from manufacturers and suppliers and delivers to the government. He managed Supreme’s supply chain under the Prime Vendor contract until early 2007.

In addition to the detailed knowledge of Supreme’s fraud set out in his complaint, Mr. Epp provided the government investigating teams with tens of thousands of e-mail messages and documents which were integral to the ability of the United States to bring these matters to a successful close. Morgan Verkamp personnel, led by Paralegal Specialist Mary Jones, spent thousands of hours analyzing the documents for the government teams, and Mr. Epp repeatedly traveled to Philadelphia from the Middle East to meet with the government’s attorneys and investigators. “This case demonstrates the power the False Claims Act brings to people who know about fraud against the United States taxpayers, even if they live abroad,” Morgan said. “By using the False Claims Act to bring Mr. Epp’s information to the Justice Department in a structured and cooperative manner, we were able to provide a level of assistance which would have been impossible without the qui tam law.”

The False Claims Act rewards whistleblowers for bringing information to the government, and Mr. Epp is to receive $16,160,000 pursuant to the False Claims Act’s “relator share” provision. Jennifer M. Verkamp of Morgan Verkamp said “The False Claims Act returns billions of dollars to American Taxpayers based on relatively small payments to whistleblowers. Here, for less than six percent of the total recovery, the Justice Department not only obtained a trove of information about these crimes and frauds, but also the detailed knowledge of a close observer to help connect the dots, and extensive support by private lawyers representing Mr. Epp. This is exactly what the Act was intended to achieve.”

“The False Claims Act is based on partnership between private whistleblowers and their lawyers, and the United States and its lawyers,” said Marc S. Raspanti of Pietragallo Gordon Alfano Bosick & Raspanti, “and this case exemplifies this partnership at its best.”

The Department of Justice’s civil investigation was run by Trial Attorney Art J. Coulter, Assistant Branch Director Michael Tingle, and Director Michael Granston of the Commercial Frauds Branch of the Civil Division, all of Washington, D.C.; and by Assistant United States Attorneys Colin Cherico, Joel Sweet, Mary Catherine Frye, and Margaret Hutchinson of the U.S. Attorney’s Office for the Eastern District of Pennsylvania.

The criminal investigation was run by Assistant United States Attorney Bea Witzleben, also of the Eastern District. Principal investigative support was provided by Defense Criminal Investigative Service Special Agent Kishara Gant of the DCIS Philadelphia Field Office, with support from DCIS Special Agent Andrew Dunphy.

The civil case, United States ex rel. Epp v. Supreme Foodservice A.G., No. 10-CV-1134, remains pending before Hon. Mary A. McLaughlin of the United States District Court for the Eastern District of Pennsylvania. The civil complaint, the settlement agreement, the criminal information, and other documents will be available at www.morganverkamp.com

Army Contractor Agrees to $10 Million Settlement to Resolve FCA Allegations

Tuesday, November 4th, 2014

After a coordinated investigation by the Commercial Litigation Branch of the Justice Department’s Civil Division, the U.S. Attorney’s Office for the District of Colorado and the Defense Criminal Investigative Services (DCIS), First RF Corporation has agreed to pay $10 million to settle False Claim Act violations. The allegations arose over a 2005 Army contract with First RF for the sale of electronic warfare antennas. At the time, the antennas were urgently needed. First RF is accused of misrepresenting the cost to manufacture the antennas, thereby inflating the price paid to First RF by the United States’ Army. First RF is an antenna and radio system company in Boulder, Colorado. The $10 million settlement did not require First RF to admit liability.

For more information, please click here.

Northrop Grumman To Pay $11.4 Million To Resolve FCA Allegations

Wednesday, December 18th, 2013

Northrop Grumman, one of the nation’s largest defense contractors, agreed to pay $11.4 million to resolve allegations that it violated the Federal Acquisition Regulations (“FAR”) and the FCA.  According to the allegations, Northrop failed to comply with its 2002 settlement agreement with the Defense Contract Management Agency (“DMCA”) by charging deferred compensation awards to key employees to its federal contracts, in violation of its 2002 settlement agreement.

The case arose when the government contracting officer found that Northrop after learning that it failed to abide by the 2002 agreement by charging the government for the costs of its deferred compensation awards and ordered Northrop to pay a penalty of twice the amount of unallowable costs.  After Northrop challenged the decision, the U.S. counterclaimed for violating the FCA by charging the government the unallowable costs.

APTx Vehicle Systems To Pay $2 million To Resolve Procurement Fraud Allegations

Thursday, December 20th, 2012

British Iraq Contractor, APTx Vehicle Systems, agreed to pay $2 million to resolve allegations that it defrauded the U.S. by making false claims in a contract for the procurement of 51 vehicles for the Iraqi Police Authority.  Specifically, APTx falsely submitted shipping documents which indicated that it had produced and was able to ship the 51 vehicles, when in fact none of the vehicles had been built, none were owned by APTx, and none were ready to ship to Iraq.   The settlement arose from a qui tam suit brought by Ian Rycroft, an individual contracted to oversee the transportation of the vehicles. Rycroft’s estate will receive $540,000 as their share of the settlement.   In addition to the civil settlement, APTx will pay a criminal fine of $1 million.

For more information, please see:
http://www.corporatecrimereporter.com/news/200/britcotopleadguilty12102012/

Defense Subcontractor Settles FCA Claims For Sonar Cones

Friday, August 17th, 2012

Defense subcontractor, Robbins, LLC, settled False Claims Act allegations filed by a former employee, James Brown of Temple, Georgia.  Mr. Brown filed the suit alleging that Robbins used an expired ingredient, Elastomag 170, when mixing a rubber compound used in sonar nose cones for U.S. Navy ships.  Goodrich subcontracted with Robbins to prepare two rubber compounds which would form the outer layers of the sonar nose cones.  Goodrich was awarded a $33 million contract to make sonar composite domes and sonar dome rubber windows to be used on the keels of Navy frigates, destroyers, and cruisers to protect sensitive sonar equipment. 

The suit also alleged that, once Robbins realized it had used expired material, it considered mixing a new batch, but that idea was dismissed due to the expense involved.  Mr. Brown also claimed that Robbins altered paperwork to conceal the fact that the Elastomag had been manufactured in 2008, when in reality, it had been manufactured in 2007. 

For more information, please see:  
http://www.prnewswire.com/news-releases/temple-georgia-whistleblower-settles-case-against-defense-subcontractor-164255056.html

Calnet Inc. Agrees To $18.1 Million Settlement Under The Federal False Claims Act, Whistleblower Receives $2.67 Million

Thursday, June 7th, 2012

Calnet Inc., which provided intelligence analysis, information technology and translation services to the Department of Defense (DoD), agreed to pay $18.1 million to settle a claim that the company inflated its rates on three contracts with the DoD from 2006 to 2010.  The contracts were  to provide translation services to the federal government at Guantanamo Bay, Cuba among other places.   The suit was initiated by a former Calnet employee, Kimthy Chao.  Mr. Chao served as the Chief Financial Officer for Calnet from 2005 until 2010.  For his role in bringing the fraudulent actions of Calnet to the attention of the Federal Government, Mr. Chao was awarded $2.67 million dollars under the provisions of the Federal False Claims Act.

For more information please see:
http://fairfaxnews.com/2012/06/reston-company-agrees-to-18-1-million-false-claims-settlement/

ATK Launch Systems Inc. Settles False Claims Product Substitution Case for Nearly $37 Million

Monday, April 30th, 2012

In a Qui Tam False Claims Act suit filed in the U.S. District Court for the District of Utah,  ATK Launch Systems Inc., has agreed to pay the United States $21 million and provide necessary in-kind services worth $15,967,160 in reparation costs for 76,000 malfunctioning para-flares that were sold to the government.  According to the government’s allegation, ATK sold dangerous and defective LUU-2 and LUU-19 illumination flares to the Army and the Air Force under Department of Defense contracts.  The company has agreed to pay a $36,967,160 settlement to the Unites States government to resolve the allegations.  

The flares were used during nighttime combat in Iraq and Afghanistan.  The government alleges that the flares provided by ATK were incapable of withstanding a 10-foot drop test as required by specifications.  During the test, flares either exploded or ignited, and ATK was aware of this issue at the time it submitted claims for payment. 

The investigation team was led by the Defense Criminal Investigative Service, the Air Force Office of Special Investigation, the Navy Naval Criminal Service, the Army Criminal Investigative Command and auditors from the Defense Contract Audit Agency, and the Defense Contract Management Agency.  Technical support was provided by the Army Research Laboratory in Aberdeen, Md., and several other agencies. 

“Our men and women in combat deserve equipment that meets critical safety and performance requirements,” said Stuart F. Delery, Acting Assistant Attorney General for the Civil Division.  The U.S. government plans to diligently pursue entities that put the lives of our soldiers in jeopardy to prevent undue harm from occurring and recover American taxpayer monies.

For more information, please see:
http://www.justice.gov/opa/pr/2012/April/12-civ-520.html

BOEING PAYS $4.392 MILLION TO RESOLVE FALSE CLAIMS ACT LAWSUIT OVER FRAUDULENT BILLING OF THE U.S. MILITARY ON CHINOOK HELICOPTER PROGRAM

Monday, January 23rd, 2012

Philadelphia, Friday, January 20, 2012: United States Attorney for the Eastern District of Pennsylvania Zane David Memeger and the United States Department of Justice announced today that The Boeing Company, the largest manufacturer of commercial jets and military aircraft combined, has agreed to pay $4,392,779.74 to settle a Federal False Claims Act whistleblower lawsuit brought by current Boeing employee Vincent A. DiMezza, Jr.

DiMezza, a former United States Marine, has worked for Boeing since 2007, currently serving as a Production Manager in the Chinook Helicopter Program at Boeing’s plant in Ridley Park, Pennsylvania. The United States Department of Justice joins Mr. DiMezza, who filed his whistleblower lawsuit in federal court in 2010, in alleging that Boeing has engaged in a pattern and practice of submitting false and fraudulent claims for modification work performed under a government contract with the United States Department of Defense to produce, maintain, repair and/or modify the Chinook CH-47D and MH-47 helicopters.

The U.S. Military Chinook Helicopter Program

The Chinook Helicopter is a multi-mission, heavy-lift transport helicopter. Its primary mission is to move troops, artillery, ammunition, fuel, water, barrier materials, supplies and equipment on the battlefield. Its secondary missions include medical evacuation, disaster relief, search and rescue, aircraft recovery, fire fighting, parachute drops, heavy construction and civil development.

Chinook Helicopters were introduced in 1962 as the CH-47 Chinook, and models A, B, C were deployed in Vietnam. A central element in the Gulf War, the Chinook continues to be the standard for the United States Army in the global campaign against terrorism. Since its introduction approximately 1,179 Chinook helicopters have been built.

Boeing’s Contract to Modernize U.S. Military Chinook Helicopters

Beginning in 2003, the United States Department of Defense awarded Boeing contracts to produce and modify Chinook helicopters as part of the U.S. Army’s effort to modernize its fleet of heavy lift helicopters. These contracts are identified by the Department of Defense as contracts numbers W58RG2 04 G 0023 and W58RGZ 08 C 0098. Over one hundred new Chinooks were ordered, and Boeing also agreed to “remanufacture” several hundred older Chinook helicopters by overhauling their airframes and performing extensive modifications to the avionics and engines.

Boeing’s manufacturing facility in Ridley Park, Pennsylvania and a Boeing facility in Millville, New Jersey are the principle sites where work is performed on the Chinook Modification Program.

Boeing’s Compensation for Modernization of U.S. Military Chinook Helicopters

Boeing’s contracts with the United States Department of Defense provide for Boeing to be compensated in two independent but related ways. First, Boeing receives a fixed price for work that must be completed on every airframe in order to upgrade it. Because this is the standard work required by the contract, this work is referred to as “Basic” work. Second, where there is pre-existing damage or wear to an airframe, Boeing is paid on an hourly basis to fix this damage or wear to an airframe. Such airframe specific work is referred to as “Over and Above” work. The majority of the time, Over and Above work is billed to the government based on an estimate of how long a given repair will take to complete. This estimate is agreed upon by the United States and Boeing. Approximately one third of the time, however, in cases in which the United States and Boeing cannot agree on an estimate before the work is complete, the Over and Above work is billed to the United States based on the time that Boeing’s employees reported actually spending on that job.

Boeing tracks the work of its mechanics and allocates their time to the bills submitted to the United States by way of a computer system. Each individual job to be completed as a part of either the Basic or Over and Above work is given an identifying number. When beginning a job, a mechanic swipes his or her unique badge at a scanner and identifies on the system the job that he or she will be doing, a process known as “badging in.” At the conclusion of work on that job, the mechanic either “badges out” of that job, i.e. swipes his or her unique badge and indicates that the job or his or her work on the job is complete, or he or she badges in to another job, which automatically stops the clock running on the first job and starts a clock running on the new job.

Boeing’s Fraudulent Billing of Work on U.S. Military Chinook Helicopters

Mr. DiMezza’s whistleblower lawsuit alleged that since at least 2003, Boeing has engaged in a scheme to fraudulently bill the Department of Defense for inflated hours of work on Chinook Helicopters. In particular, the United States and Mr. DiMezza alleged that, between 2005 and the present:

1. Multiple Boeing mechanics performed Basic work while they were badged in to Over and Above jobs.

2. Multiple Boeing first-line managers instructed Boeing mechanics to badge in to Over and Above jobs while they were actually performing work on Basic jobs. This allowed these managers to improve their mechanics’ apparent efficiency at performing Basic jobs, which Boeing carefully tracked and made part of their annual performance appraisal, at the expense of their mechanics’ efficiency at performing Over and Above jobs, which Boeing did not monitor in like fashion.

3. Some Boeing mechanics who completed their work on Over and Above jobs in less than the job’s estimated time began performing Basic work while still badged in to the Over and Above job, until the Over and Above job reached its estimated time.

4. At a meeting in approximately late 2005, a Boeing first-level manager instructed a number of senior mechanics at Boeing that they could remain badged in on Over and Above jobs while performing Basic work for up to four to five times the estimated hours for the Over and Above work.

5. As a result of the foregoing mis-billing, the United States paid Boeing extra for work that was already included in Boeing’s contract payment.

Details of the Settlement

Boeing has agreed to pay the United States $4,392,774.74 to settle the False Claims Act allegations raised by Mr. DiMezza, which were joined by the United States. In addition, Boeing further agrees as part of the Settlement to undertake significant changes at its Ridley Park, Pennsylvania plant designed to prevent similar overbilling to the Department of Defense in the future. Those remedial measures include: modifications to Boeing’s manufacturing systems to prevent overbilling Over and Above work; implementation of measures to review the efficiency of Over and Above works; and additional compliance training for employees.

Pursuant to the Federal False Claims Act, Mr. DiMezza is entitled to receive 15% to 25% of the United States’ recovery for reporting Boeing’s fraudulent overbilling scheme to the United States. In addition, the False Claims Act requires Boeing to pay Mr. DiMezza’s reasonable attorneys’ fees and costs expended in the prosecution of this case. The Court has scheduled a hearing on the settlement agreement for February 27, 2012.

Mr. DiMezza is represented by Marc S. Raspanti, Michael A. Morse, and Christopher A. Iacono, of the national whistleblower law firm of Pietragallo Gordon Alfano Bosick & Raspanti, LLP. Michael Morse, a former prosecutor and current chair of the law firm’s national whistleblower practice, applauded the courage and tenacity of Mr. DiMezza. “Mr. DiMezza has exhibited tremendous courage in blowing-the-whistle on the substantial overbilling by Boeing on the Chinook Helicopter Program. As a former United States Marine, Mr. DiMezza was especially disturbed that this overbilling repeatedly occurred on military aircraft of such importance to our men and women in uniform around the world. Mr. DiMezza, and the members of our firm’s whistleblower practice group, spent hundreds of hours working to expose this complex billing scheme and supporting all aspects of the government’s investigation. Today’s settlement would not have been possible without Mr. DiMezza’s courage and his refusal to simply look the other way.” United States Attorney Zane David Memeger likewise complimented Mr. DiMezza for coming forward in this case.

Marc Raspanti, the founder of the law firm’s whistleblower practice, applauded the work of the federal prosecutors who spearheaded the government’s enforcement efforts in this complex case: Assistant United States Attorneys Paul Kaufman and Gregory David. Mr. Raspanti also applauded the efforts of the investigators from the Defense Criminal Investigative Service who contributed significantly to the investigation of Mr. DiMezza’s complex whistleblower case. “The close partnership between Mr. DiMezza, his attorneys, and the tenacious federal prosecutors and investigators was essential to the successful recovery reached in this complex case. This is precisely the type of private-government partnership envisioned by the False Claims Act when it was substantially amended in 1986.”

The Federal False Claims Act

The False Claims Act allows private persons (known as “relators”) to file a lawsuit against those business and individuals that have directly or indirectly defrauded the federal government. The False Claims Act was enacted by Congress at the request of President Lincoln, who signed it into law on March 2, 1863. The Act was strengthened in 1986, and again with amendments enacted in 2009 and 2010. The Act is the government’s primary tool against fraud by its contractors, as evidenced by the recovery of more than $28 billion since 1986.

Pietragallo Gordon Alfano Bosick & Raspanti, LLP, is one of the largest and most successful whistleblower law firms in the United States. Lawyers in the nationwide whistleblower practice group of Pietragallo Gordon Alfano Bosick & Raspanti have served as lead or co-lead counsel in numerous whistleblower cases that have recovered more than $1 billion for federal and state taxpayers. For more information on the Federal False Claims Act, State False Claims Acts, SEC Whistleblower Program, the IRS Whistleblower Reward Program, or the nationwide whistleblower practice of Pietragallo Gordon Alfano Bosick & Raspanti, visit www.falseclaimsact.com, www.pietragallo.com, www.fraudwhistleblowersblog.com, or call (215) 320-6200.

World’s Largest Shipping Firm Agrees to Pay Federal Government $31.9 Million

Monday, January 9th, 2012

To resolve allegations of submitting false claims, Norfolk-based Maersk Line Limited and its Danish affiliate, Maersk Line, agreed to a global settlement of $31.9 million to the federal government.  It was alleged that Maersk “knowingly overcharged the Department of Defense to transport thousands of containers from ports to inland delivery destinations in Iraq and Afghanistan,” per an announcement released from the Justice Department.  The federal government also alleged that the company had overcharged for late fees by “failing to account for cargo transit times and a contractual grace period.”  In August of 2011, USA Today reported that Maersk Line Limited is “one of the top recipients of late fees.”

The U.S. Department of Justice announced this settlement on January 3, 2012.  James Philbin, attorney for Maersk, stated that the suit was first filed in 2004 by a former employee of shipping company APL, which was filed in U.S. District Court for the Northern District of California.  In 2007, the lawsuit was amended to include Maersk as a defendant.  Philbin asserts that upon first becoming aware of the allegations, Maersk conducted an extensive internal investigation and willingly disclosed all discovered information to the U.S. Military and the Department of Justice.

For more information see:  http://hamptonroads.com/2012/01/maersk-pay-federal-government-319-million

Saudi Company Pays for its Illegal Kickback Scheme to Obtain Army Contracts in the Middle East

Thursday, September 22nd, 2011

Tamimi Global Company Ltd. (TAFGA), a Saudi Arabian company, agreed to pay $13 million to the U.S. government to settle criminal and civil allegations that it paid illegal kickbacks and gratuities to a KBR employee to obtain a U.S. Army subcontract. Specifically, TAFGA paid KBR subcontract manager Steven Lowell Seamans $133,000 in kickbacks to get preferential treatment for the award of a subcontract to provide dining services in Camp Arifjan in Kuwait under KBR’s LOGCAP (Logistics Civil Augmentation Program) III contract. TAFGA also admitted paying illegal gratuities to the Army Sergeant in charge of food services at Camp Arifjan to receive favorable treatment in the contract’s performance. As part of a deferred prosecution agreement with the U.S. Attorneys Office to settle the criminal allegations against it, TAFGA will pay $5.6 million and agree to institute a strict compliance program to ensure that its employees strictly follow government contract legal and ethical standards. TAFGA will also pay $7.4 million to the U.S. to resolve civil violations of the False Claims Act and the Anti-Kickback Statute for its payment of illegal kickbacks.

For more information see: http://www.justice.gov/opa/pr/2011/September/11-civ-1226.html