Defense Supply Companies Resolve False Claims Act Liability for Substituting Surplus Parts
PHILADELPHIA – United States Attorney William M. McSwain announced today that two defense supply companies, and a married couple who operated them, have agreed to resolve the government’s claims that they supplied non-conforming parts to the military in violation of the False Claims Act. The government described its claims in its federal court complaint filed today.
The government’s complaint alleges that in 2015 and 2016, the defense supply companies, Liberty Air Parts, Inc., and US Supply Corporation of Greenlawn, New York, and their operators, George Onorato and Ellen Onorato of Lamoine, Maine, agreed to supply bolts, rings, knobs, and rivets for $24,379.60 to the Defense Logistics Agency Troop Support-Philadelphia. The defendants allegedly agreed to supply these parts in non-surplus condition, meaning brand new—direct from the manufacturer or authorized dealer—and not left over from other government projects.
Instead of supplying them in non-surplus condition, the defendants allegedly substituted leftover, surplus parts in secret. According to the complaint, the defendants concealed this substitution by falsifying records and making false statements. The complaint alleges that the substitution gave the defendants an advantage during the competitive bidding process, allowing them to quote prices for supposedly new, non-surplus parts while swapping them for leftover surplus parts after winning the bids.
To resolve the allegations, the defendants agreed to the entry of a consent judgment against them in the amount of $159,390.80. As part of this proposed consent judgment, the defendants admitted that they supplied parts in surplus condition in violation of contract requirements and the False Claims Act. The defendants also admitted that their substitution harmed open competition and undermined the integrity of the government’s procurement process. In addition, the defendants admitted that they acted recklessly when they responded to the government’s requests for information about the parts.
The proposed consent judgment will protect the public from future harm by prohibiting the defendants from contracting with the federal government at any time.
“My Office will not tolerate government contractors who cut corners and certainly will not tolerate product substitutions like the ones alleged here,” said U.S. Attorney McSwain. “Supplying non-conforming parts to the military isn’t fair to American taxpayers, isn’t fair to competing contractors, and most importantly, isn’t fair to our service members in uniform who trust that they will receive the supplies promised to them.”
“Preventing product substitution in the U.S. Department of Defense’s procurement chain is a top priority for the Defense Criminal Investigative Service (DCIS),” stated Leigh-Alistair Barzey, Special Agent in Charge of the DCIS Northeast Field Office. “The civil settlement agreement announced today is the direct result of a joint effort and demonstrates DCIS’ ongoing commitment to partner with the U.S. Attorney’s Office to identify, investigate and prosecute companies and individuals who sell non-conforming parts to the U.S. military.”
Assistant United States Attorney Michael S. Macko handled the case with investigative assistance from the United States Department of Defense Office of Inspector General, Defense Criminal Investigative Service.