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September 1, 2014 Military Contractor Fraud

New Whistleblower Lawsuit Alleges False Billing by Aircraft Company Derco Aerospace, Inc.

In a recent False Claims Act case, a whistleblower has alleged that Derco Aerospace, Inc. has unlawfully engaged in fraudulent billing practices in violation of a contract between the company and the federal government. The case, which is speculated to be the largest whistleblower case ever filed in Wisconsin, involves nearly $50 million worth of alleged false claims – all perpetrated through the use of a complex computer system designed to ambiguously render invoices to the government while avoiding detection of unlawful billing procedures.

The whistleblower complaint was originally filed in 2011, but was unsealed in August, 2014, revealing the specific details of the claims. The relator is a former financial analyst and assistant controller for Derco Aerospace. At this time, the Department of Justice has indicated its plans to intervene and file its own complaint in the matter – which it does in only about one quarter of all whistleblower cases.

Details of the Case Against Derco Aerospace, Inc.

Derco Aerospace is an aircraft parts manufacturer located in Milwaukee, Wisconsin. According to the details of the complaint, Derco and several affiliates (e.g., Sikorsky Aircraft and Sikorsky Support Services, Inc.) entered into an agreement with the Department of Defense for the provision of parts for U.S. Navy training aircraft. Allegedly, Derco implemented a 20 percent markup on the price it paid for the parts from other vendors. Unbelieveably, Derco even went so far as to use a special software program designed to hide the markups and make any detection of the fraud extremely difficult to uncover. The complaint details that the price for the parts billed to the government appeared to be the at-cost purchase price as obtained by Derco; however, it was actually the price plus markup.

According to the relator’s information, the markups total an astounding $50 million. The relator was hired by Derco Aerospace in 2002 for the position of financial analyst. She was thereafter transferred to a position of assistant controller for financial reporting, and was tasked with ensuring Derco maintained Sarbanes-Oxley compliance. By 2009, the relator was serving in the top compliance role and was the company’s chief point of contact for any audits by officials pursuant to contracts with government agencies.

The realtor alleges that, following her attempt to discuss the markups with a Sikorsky manager, she was abruptly fired due to a “reduction in force.” The relator is seeking reinstatement, double back pay, reinstatement of her benefits package, and damages to compensate any damage to her career.

Contact Berger Montague Today

If you are facing an unlawful retaliation or have firsthand knowledge of possible fraud under a government contract, please contact us right away to discuss your potential whistleblower lawsuit.