UTC liable for over $473 million for inflated jet engine prices, Ohio court finds

by Ben Vernia | June 20th, 2013

The On June 17, Judge Thomas M. Rose of the Southern District of Ohio entered findings in a bench trial of U.S. v. United Technologies Corp., finding the company liable for over $473 million excessive costs in an Air Force jet engine contract. The case had a long procedural history: it was filed in 1999, and in 2008, the Court found UTC liable under the False Claims Act, but awarded the government no damages. The Sixth Circuit affirmed the finding of an FCA violation, and reversed and remanded the damages calculation.

On remand, Judge Rose rejected the company’s argument that the government paid what it would have in the absence of fraud, and he found UTC liable for common-law damages for an early period of the contract, and under the FCA for latter periods (after the government elected the FCA as a remedy). In all, Judge Rose found, after trebling, that the company owed the government nearly $375 million in FCA damages.

According to DOJ’s press release:

The U.S. District Court for the Southern District of Ohio found United Technologies Corporation liable for over $473 million in damages and penalties arising out of a contract to provide the Air Force with fighter aircraft engines for F-15 and F-16 aircraft between 1985 and 1990, the Justice Department announced today. United Technologies, which is based in Connecticut, provides a broad range of high-technology products and services to the global aerospace and building systems industries.
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The government alleged that UTC’s proposed prices for the engine contract misrepresented how UTC calculated those prices, resulting in the government paying hundreds of millions more than it otherwise would have paid for the engines. Specifically, the government alleged that UTC failed to include in its price proposal historical discounts that it received from suppliers, and instead knowingly used outdated information that excluded such discounts.

The government filed suit against UTC in 1999 under the False Claims Act and the common law, and those claims were tried, without a jury, in 2004. An initial decision by the district court in 2008 found UTC liable under the False Claims Act, but did not award any damages. The district court also dismissed the government’s common law claims. That decision was appealed by both the government and UTC. In 2010, the Court of Appeals for the Sixth Circuit affirmed the district court’s finding that UTC was liable under the False Claims Act, but reversed and remanded the case to the district court to recalculate the government’s damages and to reconsider the government’s common law claims.

In yesterday’s ruling, the district court awarded the government False Claims Act damages and penalties of $364 million, which is the highest recovery obtained by the government in a case tried under the Act. The court also awarded an additional $109 million in damages on the government’s common law claims. With the addition of prejudgment interest on the latter claims, which the court has yet to calculate, the government anticipates that the total judgment against United Technologies could be well in excess of half a billion dollars.

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