It is troubling that seven years of fraud when revealed took another seven years for the Federal government to resolve.
Lockheed Martin Corporation (NYSE: LMT) has agreed to pay $15,850,000 to settle allegations that it overcharged for tools used on numerous government contracts, the Department of Justice announced today.
Today’s settlement with one of the world’s largest defense contractors resolves allegations arising out of an illegal inflated pricing scheme by Tools & Metals Inc. (TMI), a subcontractor that sold tools to Lockheed Martin for use on military aircraft, including the F-22 and the F-35 fighter jets.
On 8 December 2005, Todd B. Loftis, former president of TMI, pleaded guilty and was sentenced to seven years in prison in connection with his role in TMI’s scheme, which stole money from taxpayers by inflating of the costs of tools between 1998 and 2005. The government alleged that Lockheed Martin passed these costs on to the United States under its numerous defense contracts.
In a statement, the Justice Department said Lockheed Martin acted “recklessly” by failing to oversee adequately TMI’s charging practices and by “mishandling information” revealing these practices.
“It is troubling that a large defense contractor with long-established contractual ties with the United States failed to undertake appropriate measures to ensure the integrity and validity of the costs it submitted to the United States,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division.
It is also troubling that seven years of fraud when revealed took another seven years for the Federal government to resolve.
“This settlement demonstrates the government’s commitment to devoting the necessary resources to protect taxpayer funds from the most complex mischarging schemes,” claimed Sarah R. Saldaña, U.S. Attorney for the Northern District of Texas.
Today’s settlement also settles two whistleblower actions brought under the whistleblower provisions of the False Claims Act and consolidated in the U.S. District Court in Dallas.
Under the False Claims Act, a private party can file an action on behalf of the United States and receive a portion of the recovery. The whistleblowers in the two cases resolved by the settlement, Robert Spencer and John Becker, will split a $2 million share of the government’s recovery – this additional cost to the taxpayers would have been unnecessary if the Defense Department had been vigilant about how your money is spent.
The claims settled by this agreement are allegations only, there has been no determination of liability, Justice said.
