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Thursday, October 16, 2014

United States Files Complaint in False Claims Act Lawsuit Alleging Defense Contractors Knowingly Overcharged the Navy on Aircraft Maintenance Contract

The Department of Justice announced today that it has filed its complaint in intervention in a case against defendants Sikorsky Aircraft Corporation and two of its subsidiaries, Sikorsky Support Services Inc. and Derco Aerospace Inc., for violating the False Claims Act.  Sikorsky Aircraft Corporation is a wholly owned subsidiary of United Technologies Corporation, with headquarters in Stratford, Connecticut. 

The government’s complaint alleges that Sikorsky Aircraft Corporation approved an illegal cost-plus-a-percentage-of-cost subcontract between Sikorsky Support Services Inc., and Derco Aerospace.  A cost-plus-a-percentage-of-cost contract is one where the cost of performance is unknown in advance and compensation is determined based on the cost of performance plus an agreed-to percentage of such costs.  Such contracts are prohibited because they give contractors no incentive to control the cost of performance.  The complaint further alleges the defendants used this illegal subcontract to overcharge the Navy on parts and materials that were used to maintain Navy aircraft.

“Those who contract with the federal government and accept taxpayer dollars, must follow the rules,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division.  “Today’s complaint demonstrates, once again, that the Department of Justice will not tolerate contractors who engage in schemes to defraud the armed forces or any other agency of the United States.”

“The claims in the civil complaint that we have filed reflect our focused and purposeful investigative work in identifying and seeking remedies for false claims in government contracting,” said U.S. Attorney James L. Santelle for the Eastern District of Wisconsin.  “Under the authority of the False Claims Act, we pursue fraud of this sort to ensure that taxpayer dollars are spent lawfully and that overcharges and other types of contracting misconduct are addressed.”

The complaint was filed in a case brought under the qui tam provisions of the False Claims Act by Mary J. Patzer, a former employee of Derco.  Under the False Claims Act, a private citizen, called a “relator,” may bring suit on behalf of the United States and share in any recovery.  The government may intervene in the case, as the government has done here.  The False Claims Act allows the government to recover treble damages and penalties from those who violate it.

The case is being handled jointly by the Civil Division and the U.S. Attorney’s Office for the Eastern District of Wisconsin.

The case is captioned United States ex rel. Patzer v. United Technologies Corporation, et al., No. 11-C-560 (E.D. Wis.).  The claims made in the complaint are allegations only, and there has been no determination of liability. 

Updated October 16, 2014