Lockheed Martin Subsidiaries Settle $70M Navy Overcharge Claims

Nestled in the heart of Stratford, Connecticut, and Milwaukee, Wisconsin, two subsidiaries of the aerospace giant Lockheed Martin have found themselves in hot water. The U.S. Department of Justice recently announced that Sikorsky Support Services and Derco Aerospace have agreed to pay a jaw-dropping $70 million to the federal government. The reason? Overcharging the Navy for aircraft parts. This settlement serves as a stark reminder that even titans of industry are not immune to the watchful eye of the law, especially when taxpayer dollars are involved.

The crux of the matter lies in what the Justice Department describes as an “improper subcontract.” Specifically, Sikorsky Support Services purchased parts from Derco Aerospace at the cost Derco paid other suppliers, but with an eyebrow-raising 32% markup. Sikorsky then turned around and billed the Navy for this inflated cost, violating federal regulations designed to prevent precisely this sort of financial shenanigans. The result? Higher costs for the government and, by extension, the American taxpayer. It’s a classic case of passing the buck, or in this case, the inflated invoice.

Interestingly, this case has its roots deep in the past, dating back to 2011. This was well before Lockheed Martin swooped in to acquire Sikorsky, the manufacturer behind the military’s iconic Black Hawk helicopters, in 2015. The lawsuit gained momentum due to the whistleblower provision of the federal False Claims Act, with a former Derco employee stepping forward to blow the lid off the operation. One can only imagine the mix of relief and vindication that whistleblower must feel, knowing their actions led to such a significant settlement.

Statements from high-ranking officials within the Department of Justice highlight the gravity of the situation. Brian Boynton, head of the DOJ’s civil division, emphasized the importance of ensuring that government contractors adhere to the law and avoid self-dealing that drives up costs. Darrin Jones from the U.S. Department of Defense’s Office of Inspector General chimed in, noting that the settlement should serve as a cautionary tale for anyone tempted to exploit the procurement process. Meanwhile, Greg Gross from the Naval Criminal Investigative Service’s Economic Crimes Field Office lamented the overinflation of parts and material costs, pointing out how it adversely affects naval air training.

Lockheed Martin, headquartered in Maryland, issued a statement expressing satisfaction that the settlement would bring the case to a close. They were quick to note that there was no finding of wrongdoing by Sikorsky or Derco Aerospace. However, the hefty settlement speaks volumes and serves as a sobering reminder of the complexities and challenges inherent in government contracting.

So, what’s the takeaway from this multimillion-dollar saga? For one, transparency and adherence to regulations are not just bureaucratic red tape; they are essential safeguards designed to protect the interests of the American taxpayer. Secondly, the role of whistleblowers in uncovering malfeasance cannot be underestimated. Lastly, it’s a vivid example of how even industry giants can stumble—and pay dearly for it—when ethical lines are crossed.