Defense Contractor Fraud

A settlement has been reached in a whistleblower class action lawsuit brought against PC Specialists Inc., doing business as Technology Integration Group (TIG), who is accused of inflating prices of computers sold through another company to the National Nuclear Security Administration (NNSA).

The whistleblower's recovery amount has not been determined.

The case was filed in 2014 and alleged that from 2003 to 2013, TIG sold Dell computers to Sandia Corporation for resale to the United States under Sandia’s contract with the NNSA.  The NNSA purchased the computers for use at Sandia National Laboratories.  The United States alleged that TIG knowingly inflated the amounts it charged Sandia by failing to give credits for rebates and discounts it received from Dell as required by its contract and causing false claims to the government for the inflated prices.  

In a separate but related matter, in April 2015, TIG entered into a non-prosecution agreement with the U.S. Attorney’s Office of the District of New Mexico regarding allegations that three employees in TIG’s Albuquerque branch office engaged in a scheme to defraud the United States by inflating the amounts it charged Sandia for computers.  The non-prosecution agreement in that matter required TIG to terminate the employment of the three employees in its Albuquerque branch office – a vice president, a senior account executive and an accounts executive – who participated in and profited from the scheme.  The non-prosecution agreement also required TIG to retain and pay for an independent monitor selected by the U.S. Attorney’s Office who is responsible for monitoring TIG’s compliance with the agreement, and TIG policies, procedures and training relating to federal government contracts over the agreement’s three-year term. 

A settlement has been reached in a whistleblower class action lawsuit brought against CDI Corporation who is accused of charging the military for work not actually performed. 

Under the terms of the settlement, the whistleblower will receive $360,750.

The whistleblower cae was originally filed in 2005. The United States alleged that CDI wrongfully charged labor costs to work orders under military aircraft engine contracts for The General Electric Company (GE). The civil investigation examined CDI’s labor and billing records from Jan. 15, 2001, to Dec. 31, 2006. The civil investigation found that during this time period, CDI directed the mischarging of employees’ labor costs to purchase orders that would be reimbursed by the U.S. military. In fact, the employees did not perform the work billed to those military projects. CDI entered these mischarged labor costs in increments of 0.5 hours or less to evade detection.

A settlement has been reached to resolve False Claims Act allegations against Cisco Systems and Westcon Group North America (formerly d.b.a. Comstor). They are accused of making misrepresentations to the General Services Administration (GSA) and other federal agencies.

Under the terms of this agreement, the United States has agreed to dismiss a whistleblower case filed in 2004.

The United States alleged that Cisco and Westcon knowingly provided incomplete information to GSA contracting officers during negotiations in regard to Westcon's contract with the GSA, which resulted in defective pricing of Cisco products and submission of false claims to the United States.

A settlement has been reached to resolve False Claims Act allegations against Lincoln Fabrics Ltd, and its American subsidiary.  They are accused of knowingly selling the government defective products.

In October 2009, the United States filed suit against Lincoln for violations of the False Claims Act and related claims. The $4 million settlement resolves this lawsuit.

The United States allegations are in relation to Lincoln Fabrics Ltd's role in the weaving of Zylon fabric used in the manufacture and sale of defective Zylon bullet-proof vests.

Using Zylon fiber manufactured by Toyobo Corp., Lincoln wove ballistic fabric for the body armor industry. Lincoln’s woven Zylon fabric was used in the manufacture of Zylon bullet-proof vests sold by several companies, including Second Chance Body Armor Inc., First Choice Armor Inc. and Point Blank Body Armor Inc. These vests were purchased by the United States, and by various state, local, and/or tribal law enforcement agencies, who were partially reimbursed by the United States.

The United States alleged that the Zylon in these vests lost its ballistic capability quickly, especially when exposed to heat and humidity. The United States further alleged that Lincoln was aware of the defective nature of the Zylon by at least December 2001, but continued to sell Zylon for use in ballistic armor until August 2005, when the National Institute of Justice issued a report that Zylon degraded quickly in ballistic applications. At that time, all American body armor manufacturers stopped using Zylon in body armor.

A settlement has been reached in a whistleblower class action lawsuit brought against Dynamics Research Corporation (DRC) who is accused of engaging in a fraudulent kickback scheme involving two technical services contracts with the Air Force.

The contracts, first awarded in 1996, sought DRC’s expertise in procuring computer equipment and services for the Theater Battle Management Core Systems (TBMCS) program at Hanscom Air Force Base in Massachusetts. The TBMCS program provides the military with an integrated system to plan and execute air battle plans for operations and intelligence personnel at the force and unit levels. The contracts required DRC’s employees to certify that neither they nor their spouses had financial interests that would interfere with their ability to deliver unbiased advice while performing the contracts. DRC failed to obtain the certificates from former vice presidents Paul Arguin and Victor Garber, who headed the project.

The United States alleged that from 1997 to 2000, DRC, through Mr. Arguin and Mr. Garber, steered Air Force contracts for computer equipment and services to companies owned by themselves, Mr. Arguin’s wife, and others, in exchange for kickbacks and inflated contract prices that produced windfall profits for the two DRC executives. In one of the schemes, Arguin and Garber allegedly substituted inexpensive memory modules for those required by the contract, causing the Air Force to overpay for the nonconforming modules.

A settlement has been reached in a whistleblower class action lawsuit brought against Northrop Grumman Corporation, its subsidiary Northrop Grumman Space and Mission Systems Corporation, and its predecessor TRW Inc. (collectively, Northrop).  They are accused of providing and billing the National Reconnaissance Office (NRO) for defective microelectronic parts, known as Heterojunction Bipolar Transistors (HBTs).

The whistleblower will receive a $48.75 million share of the recovery.

Originally filed in 2002, the United States intervened in 2008 and alleged that Northrop and TRW failed to properly test and qualify certain HBTs manufactured by TRW from 1992 to 2002.  As a result, Northrop and TRW integrated into NRO satellite equipment certain defective HBTs.  The investigation further concluded that Northrop and TRW made misrepresentations about, and concealed certain material facts regarding the reliability of the HBTs. 

A settlement has been reached in a whistleblower class action lawsuit brought against Armor Group North America Inc (AGNA) who is accused of submitting false claims for payment on a State Department contract to provide armed guard services at the U.S. Embassy in Kabul, Afghanistan.

The whistleblower will receive $1.35 million of the government's recovery.

Originally filed in September 2009, United States alleged that in 2007 and 2008, AGNA guards violated the Trafficking Victims Protection Act (TVPA) by visiting brothels in Kabul, and that AGNA’s management knew about the guards’ activities. The settlement also resolves allegations that AGNA misrepresented the prior work experience of 38 third country national guards it had hired to guard the Embassy, and that AGNA failed to comply with certain Foreign Ownership, Control and Influence mitigation requirements on the embassy contract, and on a separate contract to provide guard services at a Naval Support Facility in Bahrain.

A settlement has been reached in a whistleblower class action lawsuit brought against Lockheed Martin Corporation who is accused of mischarging perishable tools used on numerous government contracts.

The whistleblowers will split a $2 million share of the government’s recovery.

The initial whistleblower case was filed March 2005.  The federal complaint alleged the government was overcharged as a result of a seven-year pricing scheme by Tools & Metals Inc. (TMI), a subcontractor that sold perishable tools to Lockheed Martin for use on military aircraft, including the F-22 and the F-35 fighter jets.  Specifically, the government alleged that TMI inflated the costs of these tools between 1998 and 2005, and that Lockheed Martin passed these costs on to the United States under its various contracts with the government.  On Dec. 8, 2005, Todd B. Loftis, a former president of TMI, pleaded guilty and was sentenced to seven years in prison in connection with his role in TMI’s scheme.

The United States subsequently brought civil claims against Lockheed Martin under the False Claims Act, alleging that Lockheed Martin contributed to the inflated amounts paid by the United States in connection with TMI’s pricing scheme.  Specifically, the government alleged that Lockheed Martin acted recklessly by failing to adequately oversee TMI’s charging practices and by mishandling information revealing these practices. These allegations are the subject of today’s settlement between the United States and Lockheed Martin.

A settlement has been reached in a whistleblower class action lawsuit brought against Calnet Inc who is accused of submitting false claims to the Department of Defense.

The whistleblower's portion of the settlement will be $2,669,724.

The initial whistleblower case was filed in August 2009.  The government's complaint alleged that Calnet overstated its provisional indirect or overhead rates on contracts and thus submitted inflated claims for payment to the United States. This relates to three contracts under which the company supported the United States war effort by providing translation and linguist services at Guantanamo Bay and several other facilities beginning in 2005. Calnet was a subcontractor on one of the contracts, and the prime contractor on the other two contracts.

A settlement has been reached in a whistleblower class action lawsuit brought against General Electric Aviation Services (GEAS) who is accused of submitting false claims in connection with multiple Department of Defense contracts.

The whistleblowers share of the settlement has not yet been determined.

The initial whistleblower case was filed in May 2011.  The government alleged that GEAS knowingly failed to comply with contract specifications and failed to undertake proper quality control procedures in connection with 641 external fuel tanks (EFT) it delivered to the Navy between June 2005 and February 2008. In addition, the United States complaint alleged that, between June 2010 and June 2011, GEAS knew that it falsely represented to another government contractor that GEAS had performed a complete inspection of 228 drag beams to be used on Army UH-60 Blackhawk helicopters, and that those 228 drag beams conformed to all contract specifications.