Sikorsky Support Services Inc. (SSSI), headquartered in Stratford, Connecticut, and Derco Aerospace Inc. (Derco), based in Milwaukee, Wisconsin, have agreed to pay $70 million to resolve allegations under the False Claims Act that they overcharged the Navy for spare parts and materials required for maintaining naval training aircraft.
The Justice Department filed a lawsuit in the U.S. District Court for the Eastern District of Wisconsin, alleging that SSSI and Derco, both subsidiaries of the same parent company, entered into an improper cost-plus-percentage-of-cost (CPPC) subcontract. Under this contract, SSSI purchased parts from Derco at cost plus a fixed 32% markup and then submitted vouchers to the Navy for reimbursement. The government contended that SSSI and Derco knowingly presented false cost vouchers by failing to disclose the illegal CPPC subcontract.
Principal Deputy Assistant Attorney General Brian M. Boynton stated, "Government contractors must ensure their subcontracting arrangements comply with the law and with their contractual obligations." He added that the settlement shows the Justice Department's commitment to preventing contractors from inflating charges at taxpayers' expense.
U.S. Attorney Gregory J. Haanstad for the Eastern District of Wisconsin emphasized that "government contractors must put compliance with the law ahead of profits." He noted that this settlement addresses inflated costs resulting from SSSI’s and Derco’s illegal subcontracting practices.
Special Agent in Charge Darrin K. Jones of DCIS highlighted that this settlement should deter exploitation of the Department of Defense's procurement process. Greg Gross of NCIS added that overinflation of costs adversely affected naval air training and disserved taxpayers.
The settlement resolves a qui tam lawsuit under the False Claims Act filed by Mary Patzer, a former employee of Derco. The United States intervened in this case, captioned United States ex rel. Patzer v. Sikorsky Aircraft Corp., Sikorsky Support Services Inc., and Derco Aerospace Inc., Case No. 11-0560 (E.D. Wis.).
This resolution was achieved through coordinated efforts involving the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section; U.S. Attorney’s Office for the Eastern District of Wisconsin; and DCIS.
Trial Attorneys Alan Gale, Nelson Wagner, Gary Newkirk, and Assistant U.S. Attorney Michael Carter handled this matter.
The claims resolved by this settlement are allegations only; there has been no determination of liability.