United States Files Suit Against Lockheed Martin, Mission Support Alliance, and Lockheed Executive Frank Armijo for Fraudulent Overcharging and Kickbacks
WASHINGTON - The United States has filed suit against Mission Support Alliance LLC (MSA), Lockheed Martin Corporation (LMC), Lockheed Martin Services Inc. (LMSI), and Jorge Francisco “Frank” Armijo for alleged false claims and kickbacks in connection with a multi-billion dollar contract with the Department of Energy (DOE) to support the environmental cleanup at the Hanford Site near Richland, Washington, the Justice Department announced today. During the period between 2010 and 2015, MSA, which was partly-owned by an LMC subsidiary, held a DOE prime contract to provide mission support services, including information technology services, for thousands of federal employees and contractors at the Hanford Site. Armijo is a Vice President of LMC and also served as a President of MSA between 2010 and 2015.
According to the Complaint filed by the United States, the Defendants fraudulently obtained tens of millions of dollars from DOE through a series of false statements, half-truths, material omissions, corrupt kickbacks, and outright lies. Defendants used these false statements in order to fraudulently obtain DOE consent to a $232 million subcontract between MSA and LMSI, another LMC subsidiary, according to the Complaint. The United States’ Complaint alleges that Defendants misrepresented the billing rates charged to DOE, the level of effort that they estimated would be needed to complete various work, the anticipated additional profit for LMSI on the subcontract, and MSA’s visibility into LMSI’s internal costs and profit estimates. According to the Complaint, Defendants’ fraud allowed them to obtain grossly inflated and improper additional profit on the subcontract, over and above the profit that LMC was already earning on the very same work through its ownership of MSA.
The United States’ Complaint alleges that certain LMC employees, including Armijo and Rich Olsen, another LMC official assigned to work as MSA’s Chief Financial Officer, were tasked by LMC to perform key roles for MSA, but that these LMC employees continued to work on behalf of LMC while assigned to MSA. According to the Complaint, these employees, including Armijo, misused their MSA positions to assist LMC in obtaining impermissible profit and grossly inflated pricing. Specifically, the Complaint alleges that these individuals falsely represented to DOE that MSA had independently evaluated LMSI’s pricing and proposal and determined that it represented fair and reasonable pricing for DOE and did not contain any additional profit for LMSI for the same work on which LMC was already earning profit through its ownership of MSA. The Complaint alleges that LMC paid Armijo and others millions of dollars in cash and LMC stock in return for these efforts as part of an incentive compensation program. According to the Complaint, these payments were kickbacks paid by LMC to Armijo and others as a reward for improperly using their MSA positions to provide favorable treatment for LMC.
In August 2018, Olsen paid $124,440 to resolve his liability arising from his role in the scheme set forth in the Complaint, and agreed to cooperate in the United States’ investigation of the Defendants and subsequent enforcement efforts.
Joseph H. Harrington, United States Attorney for the Eastern District of Washington, said: “Fraud, corruption, and self-dealing at Hanford will simply not be tolerated. The critical mission of cleaning up the Hanford Site in a safe, timely, environmentally responsible, and cost-efficient manner is too important to the public and the residents of this region.” Harrington went on to state, “This enforcement action demonstrates and underscores the United States Attorney’s Office’s commitment to working with our law enforcement partners to hold fraudsters accountable, whether they are individuals, businesses, or the nation’s largest corporations.”
“Where Congress has allocated money for specific purposes, we will not tolerate unlawful conduct by contractors who seek to enhance their profits at the expense of taxpayers,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division. “This lawsuit demonstrates that the Department of Justice will work tirelessly to ensure that public funds are used for the important purposes for which they are intended.”
“The Department of Energy Office of Inspector General is committed to ensuring the integrity of Departmental contracts and financial expenditures,” said Teri L. Donaldson, Department of Energy Inspector General. “We take allegations of false claims, overbilling and kickbacks very seriously and will aggressively investigate these matters to ensure efficiency throughout DOE programs. We appreciate the efforts of the DOJ in pursuing these allegations and will continue our collaboration with the DOJ to investigative those who seek to defraud Department programs.”
Joe Franco, Deputy Manager for the Richland Operations Office at Hanford, said “the Department of Energy identified the possibility of fraud to the Department of Justice and DOE Office of Inspector General during DOE’s administration of the contract. DOE appreciates the efforts of the Department of Justice and the Inspector General, and we will continue to assist with their investigation and prosecution of the alleged fraudulent activity. DOE will not tolerate fraudulent behavior by its contractors and will continue to strengthen its federal oversight at Hanford.”
Assistant United States Attorneys Tyler Tornabene and Dan Fruchter are handling this matter in conjunction with the Commercial Litigation Branch of the Department of Justice’s Civil Division, with analytical support from Affirmative Civil Enforcement Investigative Analyst Jeanne Harkleroad and investigative support from the DOE’s Office of Inspector General. The claims asserted by the United States are allegations only; there has been no determination of liability. The lawsuit is captioned United States v. Mission Support Alliance, LLC, et al. (E.D. Wash.).