Milwaukee-based
Derco Aerospace Inc. and Stratford, Connecticut-based
Sikorsky Support Services Inc. (SSSI) have agreed to pay a total of $70 million after both companies allegedly overcharged the Navy for spare parts and materials needed to repair and maintain primary aircraft used in training sessions.
Derco is a subsidiary of
Lockheed Martin that provides parts, logistics and repair services to military and commercial aircraft. SSSI, also a Lockhead Martin subsidiary, is an aircraft manufacturer.
The initial False Claims Act lawsuit against Derco and SSSI was filed in 2011 on behalf of the United States and the relator in the case,
Mary Patzer. She worked as an assistant controller at Derco.
The False Claims Act states that any person who knowingly submits false claims to the government is liable for three times the government’s damages, plus a penalty linked to inflation.
The FCA allows “private persons” to file lawsuits for violations of the act. The person filing the legal action is called a “relator.”
If the government intervenes in a qui tam lawsuit, the relator is entitled to receive between 15% and 25% of the amount recovered by the government. If the government decides not to intervene, that amount increases to between 25% and 30%.
Patzer will be awarded $13.97 million by the United States for her part in the whistleblower complaint, according to the settlement.
The FCA lawsuit alleges that Derco and SSSI knowingly entered into a cost-plus-percentage-of-cost (CPPC) subcontract. Under that contract, SSSI agreed to purchase parts from Derco at the cost that Derco paid other suppliers for those parts, plus a fixed 32% markup. SSSI then submitted cost vouchers to the Navy for reimbursement of the amounts it paid to Derco.
The government alleged that, by failing to disclose that the costs claimed by SSSI were the product of an illegal CPPC subcontract between SSSI and Derco, SSSI and Derco knowingly presented false and fraudulent cost vouchers to the Navy.
“The U.S. Attorney’s Office is committed to preventing fraud and protecting taxpayer money,” said
Gregory Haanstad, U.S. attorney for the Eastern District of Wisconsin. “Government contractors must put compliance with the law ahead of profits. This settlement makes the United States whole for the inflated costs arising from SSSI’s and Derco’s illegal subcontract deterring future violations of the law.”
Representatives from Derco highlighted the fact that the court dismissed the government’s Anti-Kickback Act claims and the False Claims Act claims against SSSI.
"We are pleased that the settlement will bring this case to a conclusion and there is no finding of wrongdoing by Sikorsky or Derco Aerospace," according to a Tuesday statement from Derco.
