FOR IMMEDIATE RELEASE
August 13, 2009
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DYNAMICS RESEARCH CORPORATION TO PAY $15 MILLION TO RESOLVE ALLEGATIONS OF KICKBACKS AND FALSE CLAIMS ON AIR FORCE CONTRACTS
Boston -- The Department of Justice announced today that DYNAMICS RESEARCH CORPORATION (DRC), a defense contractor based in Andover, Massachusetts, has agreed to pay the United States $15 million plus interest to settle allegations that two of its former executives engaged in a fraudulent kickback scheme in connection with two technical services contracts with the Air Force. The contracts required DRC to provide unbiased advice to Air Force purchasing agents seeking to procure computer equipment and services.
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. Arguin and Garber pleaded guilty in 2001, to related criminal charges of conspiring to defraud the government.
Following Arguin’s and Garber’s convictions, the United States filed a civil suit against DRC in U.S. District Court in Boston, seeking damages and penalties under the Anti-Kickback Act, the False Claims Act, and for breach of contract. The suit alleged that from 1997 to 2000, DRC, through Arguin and Garber, steered Air Force contracts for computer equipment and services to companies owned by themselves, 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 substituted inexpensive memory modules for those required by the contract, causing the Air Force to pay exorbitant prices for the nonconforming modules.
In the related criminal proceedings, United States District Court Judge Patti B. Saris sentenced the former vice presidents in 2002. Arguin was sentenced to five years in prison and ordered to pay $3.2 million in restitution. Garber received a sentence of one year and eight months in prison and was ordered to pay $2.8 million in restitution. Under the settlement agreement announced today, the United States will receive an additional $15 million plus interest from DRC.
In the civil case, United States District Court Judge Nancy Gertner ruled in 2008 that DRC had violated the Anti-Kickback Act and the False Claims Act, and breached its contracts with the Air Force, but declined to rule on damages without a trial. DRC admitted that it breached its contracts, but continued to contest the government’s fraud claims. Today’s settlement ends that litigation.
“The law requires government contractors to be honest and unbiased when providing services to our men and women in uniform,” said Tony West, Assistant Attorney General for the Justice Department's Civil Division. “The government will aggressively pursue contractors who scheme to take advantage of the military and taxpayers alike.”
Acting United States Attorney Michael K. Loucks for the District of Massachusetts noted, “This case demonstrates that we will continue to hold the government’s contractors responsible for providing honest and unbiased services to the United States. Kickbacks of the type at issue in this case, undermine the integrity of government programs and we will continue to pursue such schemes aggressively against both individuals and the contractors responsible for their employees’ behavior.”
This case was investigated by the Defense Criminal Investigative Service, the Air Force Office of Special Investigations, and the General Services Administration’s Office of Inspector General, with the assistance of the Defense Contract Audit Agency, and in conjunction with attorneys from the Department of Justice’s Civil Division and the United States Attorney’s Office for the District of Massachusetts.
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