WASHINGTON (Legal Newsline) -- The Department of Justice says Lockheed Martin Corporation will pay $15,850,000 to settle allegations that a subcontractor inflated the costs of tools from 1998 to 2005.
The company then passed these costs on to the U.S. government.
Tools & Metals Inc., sold perishable tools to Lockheed Martin for use on military aircraft, including the F-22 and the F-35 fighter jets. It is alleged that Lockheed Martin passed on these costs. The government brought civil claims using the False Claims Act - alleging the company contributed to the inflated amounts paid in connection with TMI's pricing scheme.
According to the announcement, the specific allegation by the government is that Lockheed Martin "acted recklessly by failing to adequately oversee TMI's charging practices and by mishandling information revealing these practices."
Todd B. Loftis, a former TMI president, pleaded guilty on Dec. 8, 2005 for his role in the fraud. He was sentenced to seven years in prison.
"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.
"This settlement demonstrates the government's commitment to devoting the necessary resources to protect taxpayer funds from the most complex mischarging schemes," stated Sarah R. Saldana, U.S. Attorney for the Northern District of Texas.
Lockheed Martin responded in a prepared statement sent to Legal Newsline March 23. It said, "In late 2007, the Department of Justice notified us of an ongoing investigation into the billing practices of TMI, a tooling supplier to our Aeronautics business. We fully cooperated with the investigation, which led to the prosecution and conviction of the TMI president.
"At no time did we knowingly engage in any inappropriate billing, but in an effort to close the matter in a timely manner we have agreed to a settlement. As a result of the investigation, Lockheed Martin has taken steps to ensure that its oversight of the supplier management process remains vigorous and that applicable controls are uniformly applied. We remain committed to upholding the highest standards of ethics in every aspect of our business."