Lockheed-Martin pays nearly $16 million to settle claims brought in to qui tam suits

by Ben Vernia | March 23rd, 2012

On March 23, the Department of Justice announced that Lockheed-Martin Corp. had agreed to pay $15.85 million to resolve claims brought by two whistleblowers that the company overcharged the government for aircraft tools. According to DOJ’s press release:

Lockheed Martin Corporation has agreed to pay $15,850,000 to settle allegations that it mischarged perishable tools used on numerous government contracts, the Department of Justice announced today. Lockheed Martin, headquartered in Bethesda, Md., is one of the world’s largest defense contractors.

Today’s settlement resolves allegations that the government was overcharged as a result
of a seven-year pricing scheme by Tools & Metals Inc. (TMI), a subcontractor that sold perishable tools to Lockheed Martin for use on military aircraft, including the F-22 and the F-35 fighter jets. Specifically, the government alleged that TMI inflated the costs of these tools between 1998 and 2005, and that Lockheed Martin passed these costs on to the United States under its various contracts with the government. On Dec. 8, 2005, Todd B. Loftis, a former president of TMI, pleaded guilty and was sentenced to seven years in prison in connection with his role in TMI’s scheme.

The United States subsequently brought civil claims against Lockheed Martin under the False Claims Act, alleging that Lockheed Martin contributed to the inflated amounts paid by the United States in connection with TMI’s pricing scheme. Specifically, the government alleged that Lockheed Martin acted recklessly by failing to adequately oversee TMI’s charging practices and by mishandling information revealing these practices. These allegations are the subject of today’s settlement between the United States and Lockheed Martin.

The government announced that the two whistleblowers will share $2 million of the total. The relators’ share of 12.6% (the statutory range is 15-25% for intervened cases) suggests that some of the settlement represents claims brought by the government independently of the qui tam suits.

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