Defense Contract Fraud

March 28, 2016

Tennessee-based defense contractor Kilgore Flares Company and one of its subcontractors, New York-based ESM Group Inc., agreed to pay $8 million to resolve charges they violated the False Claims Act by selling defective and illegally imported infrared countermeasure flares to the U.S. Army and, for ESM, knowingly evading U.S. customs duties.  The allegations first arose in a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act by Reade Manufacturing Company, a domestic manufacturer of magnesium powder which is used in the flares.  The company will receive a whistleblower award of $400,000 from the proceeds of the government’s recovery from ESM.  Whistleblower Insider  

March 25, 2016

U.S. Navy Capt. Daniel Dusek was sentenced to 46 months in prison for giving classified information to a foreign defense contractor in exchange for prostitutes, luxury travel and other gifts.  He is the highest-ranking official charged in a massive Navy bribery scandal.  Dusek admitted he used his influence as Deputy Director of Operations for the Seventh Fleet, headquartered in Yokosuka, Japan, and later as executive officer of the USS Essex and the commanding officer of the USS Bonhomme Richard, to benefit Leonard Glenn Francis and his company, Glenn Defense Marine Asia.  DOJ

March 18, 2016

Alex Wisidagama, the former global manager for government contracts of Singapore-based defense contracting firm Glenn Defense Marine Asia, was sentenced to 63 months in prison and to pay $34.8 million in restitution for his participation in a fraud scheme that over-billed the U.S. Navy by more than $34 million for ship husbanding services.  To date, 10 individuals have been charged in connection with this scheme with nine pleading guilty so far including Commander Michael Vannak Khem Misiewicz, Captain Daniel Dusek, Naval Criminal Investigative Service Special Agent John Beliveau, Commander Jose Luis Sanchez and U.S. Navy Petty Officer First Class Dan Layug.  DOJ

March 7, 2016

Ohio-based defense contractor ArmorSource, LLC agreed to pay $3 million to settle charges of violating the False Claims Act in connection with a contract to provide combat helmets to the U.S. Army.  According to the government, ArmorSource delivered helmets to the Army that were manufactured and tested using methods that did not conform to contract requirements, that failed to meet contract performance standards and that were eventually recalled after several lots failed ballistic safety tests.  ArmorSource had subcontracted the manufacturing of the helmets to Federal Prison Industries, Inc. (FPI), which operates under the trade name UNICOR.  The allegations originated in a whistleblower lawsuit filed by FPI employees Melessa Ponzio and Sharon Clubb under the qui tam provisions of the False Claims Act.  They will receive a whistleblower award of $450,000 from the proceeds of the government's recovery.  DOJ

March 4, 2016

Constantine Cannon is pleased to announce that its client, whistleblower Brian Emery, helped the U.S. Government recover $439,500 over allegations of faulty workmanship and the use of non-compliant materials in three federal building projects in Maine.  Click here to read more.

February 1, 2016

Florida-based military contractor Centerra Services International Inc. (formerly known as Wackenhut Services) agreed to pay $7.4 million to resolve allegations it violated the False Claims Act by double billing and inflating labor costs on its firefighting and fire protection services contract with the Army in Iraq.  According to the government, Wackenhut inflated its labor costs by billing the salaries of certain managers as direct costs when those salaries had already been charged as indirect costs.  The government further charged that Wackenhut artificially inflated its labor rate by counting its costs for holidays, vacation, sick leave, rest and recuperation and other variable labor costs twice in calculating the rate.  The allegations first arose in a whistleblower lawsuit filed by Gary W. Reno under the qui tam provisions of the False Claims Act.  He will receive a whistleblower award of $1,332,000 as his share from the government’s recovery.  Whistleblower Insider

January 29, 2016

U.S. Navy Lieutenant Commander Todd Dale Malaki was sentenced to 40 months in prison and pay a $15,000 fine and $15,000 in restitution for accepting bribes from foreign defense contractor Glenn Defense Marine Asia (GDMA) in exchange for classified U.S. Navy ship and submarine schedules and other internal Navy information.  While he was working as a supply officer for the U.S. Navy’s Seventh Fleet, Malaki began a corrupt relationship with Leonard Glenn Francis, the former president and CEO of GDMA, a company that provided port services to U.S. Navy ships and submarines throughout the Pacific.  As part of the scheme, Malaki provided Francis with classified U.S. Navy ship schedules and proprietary invoicing information about GDMA’s competitors in exchange for luxury hotel stays in Singapore, Hong Kong and the island of Tonga, as well as envelopes of cash, entertainment expenses and the services of a prostitute.  To date, 10 individuals have been charged in connection with this scheme.  DOJ  Just a day earlier, U.S. Navy Commander Michael Vannak Khem Misiewicz pleaded guilty to participating in the same scheme.  DOJ

December 9, 2015

Louisiana-based Bollinger Shipyards agreed to pay $8.5 million and release the government from contract claims to settle False Claims Act charges it misrepresented the longitudinal strength of patrol boats it delivered to the Coast Guard that resulted in the boats buckling and failing once they were put into service.  Bollinger was the subcontractor that performed design and conversion work on the Coast Guard’s existing fleet of 110-foot patrol boats.  According to the government, Bollinger provided the Coast Guard with engineering calculations that falsely represented the longitudinal strength of the boats and was two times greater than their actual longitudinal strength. The government further alleged Bollinger failed to follow the quality control procedures that were mandated by the contract that would have ensured against such engineering miscalculations.  DOJ

December 8, 2015

Three former civilian employees at the Marine Corps Logistics Base (MCLB) and one former employee of Georgia-based trucking company United Logistics were sentenced to prison following their guilty pleas to bribery and conspiracy offenses arising from their handling of military trucking contracts and theft of surplus military equipment.  Mitchell Potts, the former head of the Defense Logistics Agency (DLA) Transportation Office at the MCLB was sentenced to 10 years; Jeffrey Philpot, the former lead transportation assistant under Potts in the DLA Transportation Office, was sentenced to seven years; Shelby Janes, the former inventory control manager of the Distribution Management Center’s Fleet Support Division (FSD) at the MCLB, was sentenced to two years; and Kelli Durham, the former manager of United Logistics, was sentenced to six months.  In addition, they collectively were ordered to pay more than $2 million in forfeiture and restitution.  According to court documents, between 2008 and 2012, Potts and Philpot accepted hundreds of thousands of dollars in bribes from Christopher Whitman, United Logistics co-owner, to assure the company was awarded commercial trucking contracts from the base.  DOJ