The U.S. Department of Justice has announced that Lockheed Martin Corporation will pay $15.85 million to resolve allegations that one of its subcontractors inflated costs for military aircraft tools.
The government alleged that between 1998 and 2005 Tools & Metals Inc. (TMI) inflated the costs of tools used on military aircraft, including the F-22 and the F-35 fighter jets. Lockheed Martin passed these costs on to the United States under its various contracts with the government. On December 8, 2005, former TMI President Todd B. Loftis pleaded guilty and was sentenced to seven years in prison in connection with his role in TMI’s scheme.
Subsequently, the government brought civil claims against Lockheed Martin under the False Claims Act (FCA). The United States alleged that Lockheed Martin’s lack of oversight of its subcontractor TMI was reckless. By failing to adequately monitor TMI’s charging practices and by not properly informing authorities about these practices, Lockheed Martin opened themselves up to scrutiny and possible criminal action. These allegations formed the basis of the $15.85 million settlement.
This settlement also settles two FCA qui tam actions brought under the False Claims Act’s whistleblower provisions. Under the FCA, a private party qui tam whistleblower can file an action on behalf of the United States and receive a portion of the recovery. In this case, two individuals served as whistleblowers and will split $2 million of the total settlement.
This case demonstrates that the government’s false claims efforts are not limited to health care fraud allegations. Companies doing business with the federal government need to know that claims submitted to the federal government for services or goods are more likely to be scrutinized by potential qui tam whistleblowers. Failure to ensure proper compliance with government contract requirements can result in significant costs to contractors and future oversight by government regulators on subsequent contracts.
March 23, 2012 press release from the U.S. Department of Justice
Qui tam complaint filed March 30, 2005 in U.S. District Court, Northern District of Texas
United States complaint filed September 26, 2005 in U.S. District Court, Northern District of Texas