Aerospace Fraud

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The Aerospace Industry

The aerospace industry is a high technology field with applications in research, development, manufacturing and operation of aircraft and spacecraft. Aerospace engineering companies manufacture aircraft, propulsion units, space vehicles, satellites, and related parts and components. Aerospace companies are often hired by the United States Department of Defense and the National Aeronautics and Space Administration (NASA) to develop, upgrade or fix aging technology and equipment as needed in the United States.

Many companies in the aerospace industry receive large amounts of taxpayer dollars to manufacture goods and services needed by government agencies. Aerospace industry contracts with the federal government can be worth millions if not billions of dollars. In addition, many companies also secure contracts from foreign governments.

Baum Hedlund Settles Boeing Aerospace Whistleblower Case for $18 Million
The Boeing Company has agreed to pay $18 million to settle whistleblower allegations claiming the world’s largest aerospace company improperly charged the government for aircraft maintenance. Whistleblower James Thomas Webb, Jr., represented by Baum, Hedlund, Aristei & Goldman whistleblower attorneys Mark H. Schlein and Diane Marger Moore, will receive a reward of over $3 million for exposing the alleged aerospace fraud.

Boeing was under government contract to perform maintenance on the C-17 Globemaster aircraft at Long Beach Depot between 2006 and 2013. According to Mr. Webb, the aerospace company allegedly submitted claims during this time for 8-hour work shifts performed by its employees, even though the billed for hours included time spent at lunch and extended breaks. The breaks that Boeing billed for—which were not reimbursable under the terms of the government contract—caused the government to drastically overpay for the aircraft maintenance, according to the whistleblower lawsuit.

Aerospace Fraud and the Whistleblower

When an aerospace manufacturer submits false claims about the aerospace technology they provide to the United States Government they are committing aerospace fraud.

These false claims can include many types of corrupt conduct, including deliberately inflating the charges on a particular contract with the Department of Defense or NASA, supplying defective parts, and failing to meet the specifications of a contract. Whatever the fraudulent conduct, the end result is cheating the federal government and stealing taxpayers dollars.

Aerospace fraud is investigated by the Department of Justice (DOJ) and other federal agencies, frequently as the result of complaints filed by whistleblowers under the Federal False Claims Act. The DOJ recently filed a complaint against Sikorsky Aircraft Corporation, alleging that Sikorsky and two of its subsidiaries, Sikorsky Support Services and Derco Aerospace Inc., overbilled for parts and materials that were used to maintain Navy Aircraft. In filing the complaint the DOJ joined a whistleblower (qui tam) lawsuit that had been filed by a former employee of Derco. According to a story in the Milwaukee Wisconsin Journal Sentinel, Sikorsky billed the government using special software that hid an illegal 20% markup for the parts. The amount of the overbilling was reported to be nearly $50 million, a figure which would entitle the whistleblower to a multimillion dollar reward of as much as 25% of the money recovered by the government.

In another case that was settled on October 10, 2014, the Boeing Company paid $23 million to resolve allegations that it improperly charged the U.S. Air Force for labor costs in connection with the repair and maintenance of C-17 Globemaster aircraft. The C-17 is used to transport troops and cargo around the world. The allegations were originally brought in a qui tam lawsuit by four Boeing Company employees under the FCA. The four will split a whistleblower award of $3.9 million as their share of the settlement.

The largest settlement with an aerospace company came in 2009 when aerospace giant Northrop Grumman paid $325 million to settle FCA allegations that TRW, Inc., a company which Northrop Grumman acquired in 2002, had provided defective parts for spy satellites in the 1990s. The charges were first raised in a qui tam lawsuit brought by whistleblower Robert Ferro, an electrical engineer for a private research company that tested the parts for TRW in 1995. Ferro discovered the parts would likely fail if used in satellites but his findings were suppressed by TRW. He received a whistleblower award of $48.8 million.

Blowing the Whistle on Aerospace Fraud

All of these cases highlight the critical role that the whistleblower plays in fighting aerospace fraud by reporting schemes that would be difficult or impossible for the government to uncover without inside information. The False Claims Act permits an individual who is aware of practices that are cheating the government to file a qui tam lawsuit against the wrongdoers on behalf of the government. The Department of Justice (DOJ) is notified of the suit and, after its own investigation, may decide to join the action. In such cases, the whistleblower is entitled to receive from 15% to 25% of any monies successfully recovered by the DOJ (often after a settlement, with no actual trial).

If you are aware of aerospace fraud and are considering legal action, the experienced Baum Hedlund whistleblower team can assist you in filing a qui tam lawsuit. Expert legal assistance can protect your rights, gives you the best chance of a successful outcome and can maximize the size of your reward.

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