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Navy suppliers agree to pay $70 million to resolve False Claims Act allegations

Navy suppliers agree fee for fraudulent contract

Two Navy suppliers have agreed to pay a substantial $70 million fine to resolve False Claims Act allegations.

The allegations center on Sikorsky Support Services Inc. (SSSI), based in Connecticut, and Derco Aerospace Inc. (Derco), headquartered in Milwaukee, Wisconsin.

Two Navy suppliers agree to pay $70m to settle allegations

Both companies had been accused of overcharging the U.S. Navy for spare parts and materials needed to repair and maintain the primary aircraft used to train naval aviators.

The Justice Department alleged that SSSI and Derco, owned by the same parent entity, entered into an “improper” cost-plus-percentage-of-cost (CPPC) subcontract.

The contract was structured so SSSI would buy parts from Dereco at the price they charged other places but added a fixed 32% markup to the U.S. Navy.

The government watchdog said that the failure to disclose the added premium of the “false and fraudulent cost vouchers” to the U.S. Navy was fraudulent. This violated the standards set out by Congress around CPPC contracting.

Special Agent in Charge Greg Gross of the Naval Criminal Investigative Service (NCIS) Economic Crimes Field Office commented on the situation. He said “Overinflation of parts and material costs for the repair and maintenance of aircraft affected naval air training and is a disservice to the American taxpayer.”

“NCIS continues to safeguard the Department of the Navy’s warfighting efforts from economic crimes by upholding the integrity of the defense acquisition process.”

The Justice Department and the Department of Defense (DoD) have been vigilant about fraud. As we reported, a California man was found guilty of defrauding the Defense Logistics Agency (DLA) of $3.5m by selling counterfeit fans.

U.S. Attorney Ismail Ramsey for the Northern District of California said, “Swindling our military is a sure way to find oneself in jail. This office is always on the lookout for fraudsters and will prosecute anyone caught cheating our military by providing products that endanger our service people or compromise our readiness.”

The government departments have a zero-tolerance stance on defrauding American taxpayers and the agencies that defend their safety.

Image: Pixlr.

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