Defense Contract Fraud

February 15, 2017

Nevada-based Sierra Nevada Corporation agreed to pay $14.9 million to resolve allegations it violated the False Claims Act by misclassifying certain costs, resulting in inflated overhead rates paid to the company under various government contracts.  DOJ (EDCA)

January 17, 2017

United Kingdom-based manufacturer and distributor of power systems for the aerospace, defense, marine and energy sectors Rolls-Royce plc agreed to pay nearly $170 million as part of an $800 million global resolution to investigations by DOJ and U.K. and Brazilian authorities into a long-running scheme to bribe government officials in exchange for government contracts in violation of the Foreign Corrupt Practices Act. According to company admissions, Rolls-Royce paid more than $35 million in bribes through third parties to foreign officials in various countries including Thailand, Brazil, Kazakhstan, Azerbaijan, Angola and Iraq in exchange for those officials’ assistance in providing confidential information and awarding contracts to Rolls-Royce and affiliated entities. DOJ

January 11, 2017

January 11, 2017 – Government contractor L-3 Technologies Inc. will pay a $1.6 million penalty to settle charges that it failed to maintain accurate books and records and had inadequate internal accounting controls. According to the SEC’s order, around August 2013, executives in L-3’s Army Sustainment Division developed a “Revenue Recovery Initiative” that identified approximately $50 million in work performed under a contract with the U.S. Army that had not been billed. Because L-3 and the Army had not reached agreement on payment, any revenue recognition for that work was improper. Nonetheless, in December 2013, a senior finance official requested that 69 invoices be generated, but not delivered, causing the division to recognize almost $18 million in revenue. Because of that revenue, division employees just satisfied an internal target for management incentive bonuses. In June 2014, L-3 hired outside consultants to conduct an internal investigation. In addition to the improper revenue recognized in association with the 69 invoices, the consultants identified additional accounting errors in the division’s books from 2011 through 2014. All together, these errors had the effect of overstating the company’s pre-tax income by $169 million. SEC

December 2, 2016

Seattle-based American Management Services LLC agreed to pay more than $1.6 million to resolve criminal charges that the company defrauded the U.S. Army and Virginia-based Clark Realty Capital LLC while performing property management services for military housing at Fort Belvoir, Virginia; Fort Benning, Georgia; Fort Irwin, California; and the Presidio at Monterey, California.  Specifically, the company admitted it fraudulently obtained approximately $1 million by skimming and concealing undisclosed fees from insurance premiums paid by entities that oversaw privatized housing at the four bases.  DOJ

November 4, 2016

California-based aerospace parts company Air Industries Corporation agreed to pay $2.7 million to resolve allegations it violated the False Claims Act by falsely certifying it had performed required inspections on aerospace parts used in military aircraft, spacecraft and missiles used by the Department of Defense.  The allegations originated in a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act by an AIC employee.  The employee will receive a whistleblower award of $621,000 from the proceeds of the government's recovery.  DOJ (CDCA)

October 14, 2016

John Bertrand Beliveau II, a former Naval Criminal Investigative Service supervisory special agent, was sentenced to 144 months in prison and ordered to pay $20 million in restitution to the Navy for disclosing sensitive law enforcement reports to a defense contractor who was the target of a criminal fraud investigation in exchange for cash, luxury travel and the services of prostitutes.  According to admissions made as part of his plea agreement, Beliveau helped former Glenn Defense Marine Asia CEO Leonard Francis perpetrate a massive fraud scheme on the U.S. Navy by providing information that allowed Francis to avoid, stall and thwart criminal investigations into misconduct by GDMA.  DOJ

August 25, 2016

Fairbanks Morse Engine agreed to pay $142,500 to settle charges it violated the False Claims Act by overcharging the Navy on a subcontract for engine repairs on the USS Ashland.  DOJ (EDVA)