Another Boeing Settlement: Defense Contractor Must Pay $23 Million

The Boeing Company has played a large and diverse role in producing products, services and processes for the U.S. Defense Department over the past century. But Boeing has come under the gun recently for repeatedly engaging in fraudulent activity that’s cost the federal government and taxpayers millions. Company insiders have blown the whistle on these activities, setting off a series of False Claims Act (FCA) cases involving the manufacturer.

Another Boeing Settlement: Defense Contractor Must Pay $23 Million

Four Boeing employees and ex-employees brought the latest FCA case, United States ex rel. Craddock v. Boeing, resolved in October 2014; they will share an award of almost $4 million. Boeing, meanwhile, will pay $23 million, pursuant to allegations that the company falsely claimed labor charges for maintenance on C-17 Globemaster aircraft.

FCA Allegations Boeing Knowingly Violated Government Contract

Plaintiffs claimed that Boeing improperly charged the Air Force for labor costs under a contract to service and repair C-17s at the company’s Aerospace Support Center in San Antonio, Texas. Boeing manufactures and maintains these aircraft, which transport cargo and troops throughout the world. The Department of Justice alleged that Boeing knowingly violated its contract with the Air Force when it improperly billed the labor costs.

Boeing Whistleblowers Each Collect Nearly $1 Million

The four employees and ex-employees who filed the suit in San Antonio federal court included Clinton Craddock, Fernando de la Garza, Anthony Rico and Fred Van Shoubrouek. The False Claims Act allows private parties to file suit on behalf of the United States and share in the recovery of damages. The Department of Justice (DOJ) reports that Craddock, de la Garza, Rico and Van Shoubrouek employees will share a False Claims Act award of $3,910,000 as FCA whistleblowers in the Boeing matter.

“Today’s settlement demonstrates that the Justice Department vigilantly ensures that companies meet their contractual obligations and charge the government appropriately,” according to Joyce Branda, Acting Assistant Attorney General in the U.S. Dept. of Justice Civil Division. “Government contractors who seek illegal profit at the expense of taxpayers will face serious consequences.”

A Department of Justice press release credited the whistleblowers, the United States Attorney’s Office for the Western District of Texas, the Air Force Office of Special Investigations, the Defense Criminal Investigative Service, the Defense Contract Management Agency for the outcome noting the claims “are allegations only” and “there has been no determination of liability.”

One in a Series of Government Contract Fraud Claims Against Boeing

The beleaguered contractor has faced multiple court actions relating to allegations of fraud in government contracts over the past decade. In 2012, Boeing paid $4.3 million to resolve a claim that the company billed the Department of Defense improperly for work performed at its facility in Ridley Park, Pennsylvania.

Boeing also paid $2 million in 2011 to resolve a claim that it inflated estimates on the work required to perform maintenance and repairs to KC-135 tankers. In 2009, Boeing paid $25 million to resolve a claim that the company falsely billed for work that wasn’t performed during the installation of Mexmil blanket kits.

And in 2006, Boeing paid $615 million to settle charges that it used information on competitors to improperly procure multi-billion dollar contracts from the National Aeronautics and Space Administration and the Air Force.

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