Lockheed Martin Pays $27.5 Million to Settle Claims It Employed Unqualified Staff

The federal False Claims Act got its start addressing costly and wasteful fraud under defense contracts executed during the American Civil War. Since that time, it has proven highly successful in exposing and redressing this sort of wasteful misconduct, including a recent settlement with aircraft manufacturer Lockheed Martin. In today’s post, we discuss alleged fraud involving Lockheed’s over-charging the federal government for labor performed by unqualified or under-qualified workers during the war in Afghanistan and other military operations.

Details of the Settlement Between Lockheed Martin and the Government

The false claims at issue in this case occurred under two separate contracts between Lockheed Martin and the U.S. Army Communication and Electronics Command. The first contract, known as the Rapid Response (CR2) contract, and the second contract, known as the Strategic Sources Servicing (S3) contract, both pertained to the rapid provision of services and goods to members of the U.S. Army serving in Afghanistan and Iraq. Under these contracts, the Army is able to individually negotiate separate task orders to meet the needs of the service members serving in these areas, as needs often arise unexpectedly, requiring a quick turnaround.

Under both the CR2 and the S3 contracts, any employees utilized by Lockheed Martin to perform services under the contract must be highly qualified in their field of expertise and possess the requisite background and experience necessary to competently perform the tasks. In exchange, the government agreed to pay a certain wage to these qualified employees. However, according to the allegations, Lockheed Martin engaged in the consistent hiring of unqualified workers that did not meet the standards listed in the government contracts – despite billing the government for the qualified employees nonetheless.

Government’s Response

According to acting Assistant Attorney General Joyce Branda:

“Contractors that knowingly bill the government in violation of contract terms will face serious consequences….department will ensure that those who do business with the government, and seek taxpayer funds, do so fairly and in accordance with the applicable rules.”

The Defense Criminal Investigative Service likewise issued a statement, remarking:

“This settlement demonstrates the commitment of the Defense Criminal Investigative Service and our partners to vigorously pursue alleged violations of the False Claims Act… All contractors doing business with the federal government are expected to abide by the acquisition rules no matter who they are.  Investigations of such allegations are necessary to protect American taxpayers and our warfighters.”

In a typical statement, Lockheed Martin reiterated that it did not admit any liability in the matter and opted to settle in order to avoid the expense and time commitment of litigation.

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