U.S. Department of Justice Claims Overbilling by Sikorsky Aircraft Corp.

 

The U.S. Department of Justice said it has filed a complaint against Sikorsky Aircraft Corp. and its Milwaukee subsidiary, Derco Aerospace Inc., over millions of dollars in alleged overbilling for aircraft parts.

The Justice Department filed its "complaint in intervention" in a whistle-blower lawsuit brought by Mary J. Patzer, a former Derco employee.

That lawsuit, disclosed in August, alleged that Derco and its parent and sister companies, Sikorsky Aircraft and Sikorsky Support Services Inc., submitted false bills to the Department of Defense with an impermissible 20% markup on parts the companies had purchased from other vendors.

It amounted to nearly $50 million in false billings, according to Patzer's attorney, Nola Hitchcock Cross.

"We continue to believe that the allegations regarding this matter have no merit, and we intend to defend this lawsuit vigorously," Sikorsky spokesman Paul Jackson said.

The government's complaint contends that Sikorsky approved an illegal "cost-plus-a-percentage" subcontract between Sikorsky Support Services and Derco. The complaint further alleges the defendants used this to overcharge the U.S. Navy for parts and materials used to maintain Navy aircraft.

"Those who contract with the federal government and accept taxpayer dollars must follow the rules,"

"Under the authority of the False Claims Act, we pursue fraud of this sort to ensure that taxpayer dollars are spent lawfully, and that overcharges and other types of contracting misconduct are addressed," U.S. Attorney James Santelle, for the Eastern District of Wisconsin, said in the statement.

As the "relator" in the whistle-blower lawsuit, Patzer may be entitled to between 15% and 25% of any money recovered.

Patzer alleged that special software hid the Sikorsky markup as the price billed to the government appeared to be the actual purchase price of the spare parts, but was instead the price plus the markup.

She was hired by Derco in 2002 as a financial analyst. In 2003, she became assistant controller for financial reporting and Sarbanes-Oxley compliance. By 2009, she was the point of contact for the company's defense contract audits, according to her complaint.

"In the course (of) her employment, Patzer gained firsthand knowledge of fraudulent and improper billing practices by Derco and its parent and affiliated companies," her complaint said. "Such practices included presenting inflated bills for costs to the United States government based on an unauthorized and undisclosed markup of parts and repair services obtained from suppliers, billed to Sikorsky Support Services Inc., and ultimately billed to the United States government."

Soon after Patzer exposed the billing issues to a Sikorsky manager in 2010, she was fired due to a "reduction in force," according to her lawsuit.

"I had to stand up and do the right thing. But after I questioned the markups with the company, I was walked out," Patzer said through Cross in an earlier statement.

Cross said the government intervenes in only a little more than 20% of False Claim Act cases.

"They pick the strongest ones, that have the most impact, that have the potential for the most recovery," Cross said Thursday. "When that happens, the government puts all of its resources into the (case). It strengthens the case hugely."