Lockheed Martin affiliates pay for overcharging the Navy for $70 million

The U.S. Department of Justice said on Friday that two Lockheed Martin businesses had agreed to reimburse the federal government $70 million for overcharging the Navy for airplane components.

The US Department of Justice said on Friday that two Lockheed Martin businesses had agreed to pay the federal government $70 million for overcharging the Navy for airplane components.

The federal government claims that Derco Aerospace, with its headquarters in Milwaukee, Wisconsin, and Sikorsky Support Services, with its headquarters in Stratford, Connecticut, deliberately engaged into an unlawful subcontract for supplies and replacement parts for aircraft used to educate Navy pilots.

Sikorsky bought the components from Derco under the terms of the deal, which included a 32% markup on top of the price Derco paid other vendors.

Subsequently, Sikorsky invoiced the Navy for the amount it had paid Derco, contravening federal laws that prohibit such agreements, which, according to the prosecution, increase public expenditures.

Brian Boynton, the director of the DOJ's civil division, said in a statement that "today's arrangement demonstrates that the Justice Department will ensure that government freelancers do not skirt the law and engage in self-dealing that may deliberately raise their charges at the expense of the American taxpayers."

An email requesting comment on Friday was not immediately answered by Lockheed Martin spokespeople.

According to the prosecution, the settlement ends a complaint brought under the federal False Claims Act's whistleblower provision by a former Derco employee.

The settlement should act as a deterrence for individuals attempting to take advantage of the agency's procurement process, according to Darrin Jones of the Office of Inspector General of the US Department of Defense.

Greg Gross, of the military Criminal Investigative Service's Economic Crimes Field Office, said, "Overinflation of parts as well as material costs for maintenance and repairs of aircraft affected naval air operations and is a disservice to the American taxpayer."