ABS Development Corporation Agrees to Pay $2.8 Million to Settle False Claims Act Allegations and to Waive Administrative Claims

The Department of Justice has announced that ABS Development Corporation (ABS) has agreed to pay $2.8 million and give up $16 million in potential administrative claims to settle allegations that it violated the False Claims Act by fraudulently obtaining a foreign military sales contract reserved for American companies.  ABS, a Delaware corporation based in New York, is a subsidiary of Ashtrom International, Ltd. of Israel.

The settlement announced today resolves allegations that ABS fraudulently induced the Army to award ABS a contract for the renovation of the Haifa, Israel shipyard by falsely misrepresenting that it would perform the contract when, in fact, its Israeli parent company, Ashtrom, intended to do so; and for presenting false claims to the United States certifying that it was performing work as the prime contractor when in fact the work was performed by Ashtrom.  Foreign military sales contracts require prime contractors to be American companies that perform a substantial portion of the work.  The Army would not have awarded the contract to ABS, nor paid ABS’ invoices, had it known that Ashtrom, not ABS, was going to perform and did perform the contract. 

“Those who contract with the government are obliged to follow the law,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division.  “We will continue to enforce rules designed to protect American businesses and taxpayers.”    

“The Defense Criminal Investigative Service (DCIS) is committed to protecting the integrity of the Department of Defense acquisitions process and safeguarding taxpayer dollars,” said Stanley A. Newell, the Special Agent-in-Charge of the DCIS, Transnational Operations Field Office.  “Our dedicated special agents will thoroughly investigate allegations of fraud and pursue all available remedies against those who subvert DoD contracts for their own gain.”

This settlement was the result of a coordinated effort among the Civil Division’s Commercial Litigation Branch, the Defense Criminal Investigative Service, the Major Procurement Fraud Unit of the Army’s Criminal Investigative Command, and the Defense Contract Audit Agency.  

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