Milwaukee City Wire

Sikorsky Support Services, Inc. and Derco Aerospace, Inc. have agreed to pay $70 million to resolve allegations under the False Claims Act that they overcharged the Navy for spare parts and materials needed to repair and maintain aircraft used to train naval aviators. The announcement was made by Gregory J. Haanstad, United States Attorney for the Eastern District of Wisconsin, in conjunction with the Civil Division of the Department of Justice.

The United States alleged that SSSI and Derco entered into an improper cost-plus-percentage-of-cost (CPPC) subcontract. Under this contract, SSSI purchased parts from Derco at their cost plus a fixed 32 percent markup and then submitted cost vouchers to the Navy for reimbursement. The government claimed that SSSI and Derco knowingly presented false and fraudulent cost vouchers by failing to disclose the illegal CPPC subcontract between them. The district court ruled that Derco’s markup violated federal statutes barring CPPC contracting, which Congress prohibited due to its potential to drive up government costs.

“Government contractors must ensure their subcontracting arrangements comply with the law and with their contractual obligations,” stated Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “Today’s settlement demonstrates that the Justice Department will ensure that government contractors do not skirt the law and engage in self-dealing that may artificially inflate their charges at the expense of American taxpayers.”

“The United States Attorney’s Office is committed to preventing fraud and protecting taxpayer money,” said Gregory J. 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 while deterring future violations of the law.”

“Today’s settlement agreement should serve as a strong deterrent for those who seek to exploit the DoD’s procurement process,” remarked Special Agent-in-Charge Darrin K. Jones, Department of Defense Office of Inspector General, Defense Criminal Investigative Service (DCIS), Southeast Field Office.

Special Agent in Charge Greg Gross of NCIS Economic Crimes Field Office added, “Overinflation of parts and material costs for aircraft repair affected naval air training and is a disservice to American taxpayers.”

The lawsuit was filed under the qui tam or whistleblower provision of the False Claims Act by Mary Patzer, a former employee of Derco, allowing private parties to sue on behalf of the United States for false claims.

The resolution was achieved through coordinated efforts between several branches within the Justice Department including its Civil Division's Commercial Litigation Branch Fraud Section, and U.S. Attorney's Office for Eastern District of Wisconsin.

Assistant United States Attorney Michael Carter along with Trial Attorneys Alan Gale, Nelson Wagner, and Gary Newkirk handled this matter.

The claims resolved by this settlement are allegations only; there has been no determination of liability.

 

For additional information contact:

Public Information Officer

Kenneth.Gales@usdoj.gov