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United States Settles With Boeing Over Improper Billing

January 20, 2012


PHILADELPHIA - The Boeing Company has agreed to pay the United States $4,392,779.74 and to undertake several programmatic changes, resolving claims that Boeing improperly billed the Department of Defense for work at Boeing's facility in Ridley Park, Pennsylvania. The settlement was announced today by United States Attorney Zane David Memeger, Direct James K. Podolak of the Army Criminal Investigation Division’s Major Procurement Fraud Unit (MPFU), and Special Agent-in-Charge Edward T. Bradley with the Defense Criminal Investigative Service (DCIS).

Beginning in approximately 2003, the United States Department of Defense awarded Boeing contracts to produce and modify Chinook helicopters as part of the Army's effort to modernize its fleet of heavy lift helicopters. More than 100 new Chinooks were ordered, and Boeing also agreed to "remanufacture" several hundred older Chinook helicopters by overhauling their airframes to accommodate upgrades of the helicopter's avionics and engines.  The Ridley Park plant is the principal site where this work is performed.

The vast majority of the work performed in the Chinook remanufacturing program was paid based on a pre-negotiated price.  The government's investigation revealed that several Boeing managers instructed the mechanics assigned to the Chinook program to perform other, non-billable work while separately billing the United States for their time, resulting in the United States being charged for work for which it had already paid.  The False Claims Act makes it illegal for any person or entity to present a false or fraudulent claim to the United States for payment and/or to retain overpayments that were improperly received.

The investigation did not reveal any quality-related problems or impediments to military efforts from this fraud.  Boeing cooperated with the investigation.

To ensure that the problem does not persist at Ridley Park, the settlement requires Boeing to implement several independent remedial measures, including both retraining of its employees and technological improvements in the software Boeing uses to track its billing.  Over the next few years, Boeing will also implement a new labor tracking computer system for its defense manufacturing facilities nationwide, and it has agreed to implement similar technological measures where appropriate to help ensure that a similar problem does not occur at other facilities.

“The False Claims Act was originally passed to combat defense procurement fraud,” said Memeger. “It remains a critical weapon in the Department of Justice's battle to ensure that every taxpayer dollar is spent as efficiently and honestly as possible.  The Department of Justice and United States Attorney's Offices across the country are committed to rooting out frauds like this one, to recouping the taxpayers' money, and to putting in place the mechanisms necessary to ensure that the offender will not commit such a fraud again.”

A whistleblower filing a qui tam lawsuit under the False Claims Act brought the fraudulent billing scheme to the government's attention. United States Attorney Memeger complimented the whistleblower for coming forward.

“Some of the most important cases begin with a citizen who sees something wrong and speaks up. Whistleblowers who notify the government of possible fraud allow us both to correct that specific problem and to prevent similar misconduct from recurring in the future. Everyone benefits from cooperation between the government and an active, alert community,” Memeger said.

“This settlement is an example of the teamwork amongst Special Agents of the Major Procurement Fraud Unit (MPFU), U.S. Army Criminal Investigation Command, the Defense Criminal Investigative Service, and the U.S. Attorney's Office, who continue to protect and safeguard our tax dollars by pursing justice through civil remedies,” said Director Podolak. “MPFU will continue to protect the interest of our tax dollars by continuing to work jointly with our law enforcement partners.”

“The misuse of U.S. taxpayer monies by Defense contractors corrupts our acquisition infrastructure,” said Special Agent-in-Charge Bradley. “Investigating false claims for work on our critical military equipment remains an operational priority for the Defense Criminal Investigative Service. DCIS will continue to pursue violations of the False Claims Act with the assistance of our partner agencies to ensure the well-being of our U.S. military and proper stewardship of acquisition funds.”

The Court has scheduled a hearing on the settlement agreement for February 27, 2012.

The case was investigated by the Defense Criminal Investigative Service and the Major Procurement Fraud Unit of the United States Criminal Investigation Command. It is being handled by Assistant United States Attorneys Paul Kaufman and Gregory David.

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PATTY HARTMAN, Media Contact, 215-861-8525


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