Northrop Grumman Systems Corp Will Pay $31.65 Million to Settle Defense Contract Fraud Allegations

Northrop Grumman, a defense contractor, has agreed to pay $27.45 million to settle claims of fraudulent billing.  

Northrop Grumman Systems Corp Will Pay $31.65 Million to Settle Defense Contract Fraud Allegations

An investigation led by the Air Force Office of Special Investigations (“AFOSI”), the Defense Criminal Investigative Service (“DCIS”), and the FBI uncovered an international scheme to defraud the U.S. Air Force. The agencies found out that employees at Northrop Grumman Systems Corporation (“NGSC”) illegally profited by inflating their work hours on bills for two contracts with the armed forces.

According to the DOJ, the company billed the Air Force for working hours claimed by employees assigned to the Middle East who had not actually worked those hours. From January 2011 to October 2013, the NGSC deliberately mischarged the Air Force for 12 to 13.5 hour work days when, in fact, the workers were not working overtime, but engaging in activities such as sports and partying (among themselves and with their families) and enjoying their five-star accommodations.

By overstating the number of hours worked, employees personally profited, defrauding American taxpayers by roughly $5 million.

One of the leading Air Force investigators in the case, Jason T. Hein, expressed his satisfaction at the outcome of the investigation, “Air Force OSI’s Office of Procurement Fraud is dedicated to protecting the taxpayer’s interests worldwide while safeguarding the needs of the warfighter.   

This investigation is a testament to AFOSI’s global reach, and to our partnerships with DCIS and the FBI which allowed us to meticulously unravel this international conspiracy to defraud the U.S. Air Force,” Hein said in a statement.

The company had reported the issue to government back in 2013. At the time, NGSC took full responsibility for the misconduct, fired a certain number of employees, and implemented disciplinary and reparative actions.

Now, in addition to the $27.45 million, NGSC has also agreed to pay another $4.2 million to settle allegations relating specifically to the Battlefield Airborne Communications Node contract.  

Upon the announcement of the multi-million-dollar settlement, the U.S. Attorney for the Southern District of California commented, “Federal contracts are not a license to steal from the U.S. Treasury. DOJ is firmly committed to vigilantly weeding out abuse and will swiftly pursue all available remedies when egregious fraud occurs.”

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