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June 25, 2024

Sikorsky, other Lockheed subsidiary agree to pay $70M for overcharging Navy

UCONN Students gather around a Sikorsky Black Hawk Helicopter during "Lockheed Martin Day" at UConn.
By Skyler Frazer

Helicopter manufacturer Sikorsky and another Lockheed Martin subsidiary have agreed to pay $70 million to resolve a lawsuit that alleged the firms overcharged the U.S. Navy for work, the U.S. Department of Justice (DOJ) announced earlier this month.

Stratford-based Sikorsky Support Services and Derco Aerospace, a Wisconsin-based manufacturer, agreed to make the payment to resolve False Claims Act allegations made by the DOJ. According to the lawsuit, which was originally filed by a whistleblower in 2011, Sikorsky and Derco “knowingly entered into an improper cost-plus-percentage-of-cost subcontract” with the Navy and overcharged the military branch for spare parts and materials needed for naval aviator training aircraft.

Both companies are subsidiaries of defense industry giant Lockheed Martin.

Specifically, the DOJ alleges that Sikorsky purchased parts from Derco at a marked up price, then submitted cost vouchers to the Navy for reimbursement based on those marked up receipts. The lawsuit alleges the breach in contract was from 2006 to 2012.

The U.S. District Court for the Eastern District of Wisconsin ruled that Derco’s markup violated a federal statute barring that type of contracting.

“Government contractors must ensure their subcontracting arrangements comply with the law and with their contractual obligations,” Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division, said in a statement. “Today’s settlement demonstrates that the Justice Department will ensure that government contractors do not skirt the law and engage in self-dealing that may artificially inflate their charges at the expense of the American taxpayers.”

According to the settlement document, the lawsuit actually stems from a complaint filed in 2011 by a former Derco employee that alleged wrongdoing by the companies. The U.S. DOJ got involved in 2014 and has been working on the case since.

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