Military Contractor L-3 Settles Defective Sight Case for $25 Million

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L-3 Communications and its subsidiary, EOTech, have agreed to pay $25.6 million to resolve a civil fraud lawsuit under the False Claims Act. The company allegedly sold millions of dollars of defective combat optical sights to the Department of Defense, Homeland Security and Federal Bureau of Investigation as part of government contracts.

Federal Contractor Misconduct Led by Energy and Healthcare Companies

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Defense contractors are no longer tops on the list of naughty government contractors, with energy and healthcare companies (in particular the pharmaceutical manufacturers) leading the list of misconduct among those that receive federal government spending. The Project on Government Oversight has revamped and re-released its database of misconduct by federal contractors. In total, the companies tracked by POGO have paid at least $92 billion in fines, settlements and court judgments for corporate wrongdoing. The database profiles just over 200 of the largest contractors and tracks 2,500 instances of misconduct (both resolved and pending) dating back to 1995.

McEldrew Young Purtell Merritt Client Exposes Customs Fraud by Military Contractor

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We are pleased to announce that our client, Todd Mihajlovic, exposed the concealment of the origin of goods imported into the United States by ECL Solutions Limited, Inc., a British company doing business with the U.S. military as Ban-Air Storage Systems (“ECL”). Yesterday, the U.S. Department of Justice announced that ECL pleaded guilty to conspiring to smuggle goods into the United States and was ordered to pay a forfeiture money judgment of $1,066,132.10 in the criminal prosecution in the U.S. District Court for the Eastern District of Pennsylvania. The Government’s press release announcing the success in the criminal matter can be found on the DOJ’s EDPA website here.

We represented Mr. Mihajlovic, who filed a civil qui tam lawsuit under the False Claims Act in the U.S. District Court for the District of Delaware in 2012. Mr. Mihajlovic’s complaint alleged that ECL violated the False Claims Act because of false representations made by the company that products it sold to the United States complied with the Buy American Act (BAA) and the Trade Agreements Act (TAA). According to the Complaint, ECL obscured the fact that its steel racking systems sold to the U.S. military were actually imported from China.

Mr. Mihajlovic has our profound gratitude for bringing the company’s scheme to the attention of the U.S. Government.  Here at McEldrew Young Purtell Merritt, Attorney Brandon Lauria took the lead on the case and spent countless hours on the case to see it to a successful resolution.  We were assisted by United Kingdom Solicitor-Advocate Howard S. Brown, who is associated with Shepherd, Finkelman, Miller & Shah, LLP.

This case is an example of the rise of international whistleblowing, as our client is located outside the United States.  Fortunately, the whistleblower laws incentivize reporting by individuals regardless of their location and citizenship.  The False Claims Act, as well as the SEC, CFTC, and IRS whistleblower programs, do not restrict the U.S. Government from rewarding international whistleblowers.  Otherwise, in the era of transnational commerce, fraud might go unchecked simply because the evidence of the corporate wrongdoing is located in a foreign country.

If you are a whistleblower, located here in the United States or abroad, interested in reporting customs fraud in America or the bribery of customs officials abroad, contact our office for a free initial legal consultation concerning your case.

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Boeing Settles Whistleblower Lawsuit on Overbilling Plane Maintenance

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Boeing has agreed to pay $18 million to resolve allegations that it knowingly billed the government for employees on extended lunch hours and breaks. The whistleblower lawsuit under the False Claims Act was originally filed by a former employee of the company. His relator share has not yet been determined.

The lawsuit related to a defense contract for maintenance and repair of U.S. Air Force C-17 Globemaster aircraft at a facility in Long Beach. The company was allowed to bill for labor charges on the contract. However, the lawsuit alleged that Boeing billed for time when the mechanics were not working on the contract and were instead on extended breaks or lunch.

This is not the first settlement of a False Claims Act case related to a defense contract by Boeing for this aircraft. Last year, the Justice Department settled a False Claims Act lawsuit brought by present and former Boeing employees regarding a facility in San Antonio, Texas. The company paid $23 million to resolve the allegations and the group of whistleblowers received just over $3.9 million.

The False Claims Act allows individuals to bring lawsuits on behalf of the U.S. Government to recover government funds. If successful, the relator is entitled to between 15 and 30 percent of the funds recovered.

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Military Contractor Fraud Triumvirate


Three prime examples of military contractor fraud deserve attention today. Two put  service members at serious  risk of bodily harm or death, and all of them bilked tax payers.

In the first case, a subcontractor of Sikorsky agreed to pay $1.2 million to settle a FCA claim. Ceradyne, Inc., of Costa Mesa, CA, allegedly failed to ballistically test armor plating it installed near the pilot and copilot in Black Hawk helicopters.  The Black Hawk is used by the Army, Navy, Air Force, and Marines. Ceradyne allegedly failed to conduct the tests between 1992 and 2006, so there is potentially  a whole generation of Black Hawks out there that is not providing adequate protection for its crew members.

The second case also involves helicopters. This time, Bell Helicopter Textron realized that it (oops) overcharged the government for helicopters and services. Bell already paid more than $12.8 million in 2006 to settle its billing mistakes. Now, Bell must pay an additional $3.7 million to settle any claims the U.S. may have against the subsidiary Bell Helicopter Textron Canada Limited as a result of intra-company charges that led to more overbilling. This case comes under the umbrella of the National Procurement Fraud initiative, which is designed to identify this type of fraud early on. Unfortunately, military contractors are good at staying one step ahead of the government.

In the third leg of the military contractor fraud triumvirate is a case involving M24o and M249 machine guns.  A former employee of defense contractor Northside Machine Company accused his employer of ordering him to approve gun parts that didn’t meet quality standards for troops and then (surprise!) firing him for blowing the whistle. Northside provides trigger assemblies and other parts for M240s and M249s, which are widely used by the military. A federally funded research group found that 30% of troops surveyed reported that the M249 had simply stopped firing during combat, which is probably not the best thing when some insurgent is trying to take you out!

UPDATE: Maybe this should actually be called a quadumvirate! The Army has announced that it is recalling 44,000 advanced combat helmets manufactured by Hebron, OH-based ArmorSource LLC. Apparently the helmets (already issued to soldiers worldwide) do not meet military specs. So now, it looks like tax dollars are being spent to send soldiers out in helicopters with inadequate armor to fight with guns that don’t shoot while wearing helmets that may not offer enough protection!

This article is brought to you by The Qui Tam Team, the epicenter for whistleblowers and people interested in the False Claims Act, Qui Tam Provisions, and Medicare and Medicaid fraud. To discuss a potential case, please call Eric Young at 1 (800) 590-4116.

Whistle Blown on KBR Once Again


The army just can’t seem to break it off with military contractor KBR. They’re like that couple everyone wants to break up, but they stay together–usually with one party taking advantage of the other. We’ve recently blogged about KBR’s ongoing legal troubles, but here is just one more volume for a shelf sagging under the weight.

Even though the DOJ has just joined a whistleblower lawsuit against KBR, the Army has announced a $568 million no-bid contract with the company through 2011 for military support services in Iraq.

KBR allegedly accepted meals, sports tickets, and golf outings from two freight forwarding companies.

KBR denies the allegations, of course, and in a statement said that “Gifts of dinners, baseball tickets and other similar items would violate KBR policies.” This is sort of like saying, “It would just be so awful if some (hypothetical, of course) company bribed officials. Nothing specific, other than dinners and baseball tickets…er…” KBR went on to say that maybe, possibly, if this hypothetical naughty company did give any gifts, they would have been less than $20,000. No big deal, right?

The problem is that this kind of behavior ends up costing taxpayers money in the end. Although the government hasn’t definitively stated whether the kickbacks cost taxpayers money yet, there is a strong possibility that KBR passed up companies offering lower costs for those that bought the best dinners and seats for games. Choosing a supplier on the basis of the gifts they provide shifts a government contractor’s priorities away from where they belong (providing the best value to the taxpayer) and warps the “bidding” process into one in which the contractor puts its own interests first.  Fortunately, there are whistleblowers out there to help keep contractors like KBR in check.

This article was sponsored by The Qui Tam Team, the epicenter for whistleblowers and people interested in the False Claims Act, Qui Tam Provisions, and Medicare and Medicaid fraud. To discuss a potential case, please call Eric Young at 1 (800) 590-4116.

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