Department of Justice Intervenes in Whistleblower Lawsuit Against U.S. Navy Contractor Sikorsky Aircraft

The United States government has opted to intervene in a pending whistleblower lawsuit filed against several military contractors, including Sikorsky Aircraft Corporation and two of its subsidiaries, Sikorsky Support Services Inc. and Derco Aerospace Inc. Sikorsky Aircraft Corporation is a wholly-owned subsidiary of United Technologies Corporation, a long-time provider of defense services and military equipment, including helicopters and jet engines. Despite the defendants’ assertions that the claims are meritless, a former assistant controller for Derco Aerospace contends that the companies routinely and systematically overbilled the government through the use of unlawful contract provisions and illegal cost-plus-a-percentage-of-cost sub-contracts with service providers.

Details of Case Against Sikorsky, et al.

The allegations against Sikorsky began in 2011 when a former employee noticed that the bills submitted to the Department of Defense for reimbursement for aircraft maintenance did not comport with the actual recorded costs and expenses associated with the projects. Upon further investigation, the whistleblower uncovered facts to suggest that Sikorsky sub-contracted with Derco for aviation parts and components using an illegal cost of performance algorithm. More specifically, Sikorsky agreed to pay Derco compensation determined by the “cost of performance plus an agreed-to percentage of such costs.” Under government regulations, this type of arrangement is illegal where the government is a party to the deal – reason being, the obliged has absolutely no incentive to control costs. As a result, Sikorsky allegedly overbilled the government for the sub-contract work, parts, and materials provided by Derco.

Allegedly, Sikorksy’s invoices to the government contained a 20 percent markup from the actual costs under the sub-contract.

In addition to the whistleblower’s false claims allegations, she further asserts that she was fired in 2010 after bringing the billing issues to the attention of supervisors and managers. However, Sikorsky maintains that the whistleblower was fired simply due to a reduction in workforce and the termination was not retaliatory in nature.

Government’s Intervention

The U.S. government has been handling military contract misconduct since the Civil War era. Acting Assistant Attorney General for the Civil Division Joyce R. Branda commented, “Those who contract with the federal government and accept taxpayer dollars, must follow the rules….Today’s complaint demonstrates, once again, that the Department of Justice will not tolerate contractors who engage in schemes to defraud the armed forces or any other agency of the United States.”

Eastern District of Wisconsin Assistant U.S. Attorney James Santelle also remarked, “The claims in the civil complaint that we have filed reflect our focused and purposeful investigative work in identifying and seeking remedies for false claims in government contracting….Under the authority of the False Claims Act, we pursue fraud of this sort to ensure that taxpayer dollars are spent lawfully and that overcharges and other types of contracting misconduct are addressed.”

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