Improper Markups on Parts Lead to $70 Million Sanction Against Sikorsky

Hundreds of billions of dollars are spent on the nation’s defense budget each year. With so much taxpayer money passing between defense contractors and the government, some companies are tempted to squeeze a little extra money out of the Defense Department through fraudulent billing. One example of this that was reported by a whistleblowing employee resulted in an eight-figure penalty for a major manufacturer of military equipment. 

Sikorsky Support Services Inc. and Derco Aerospace Inc. agreed to pay a $70 million settlement to resolve allegations of fraudulent overcharging for parts sold to the U.S. Navy. This substantial payout stems from a qui tam lawsuit filed under the False Claims Act, which provides a financial incentive for employees to call out fraud against the government. In return for exposing wrongdoing, whistleblowers can receive a portion of the recovered funds.

Whistleblower Mary Patzer, a former Derco employee, alleged in her qui tam complaint that the companies had engaged in an illegal cost-plus-percentage-of-cost contract, inflating the prices of spare parts by a staggering 32 percent. These inflated costs were then passed on to the Navy, resulting in substantial financial losses for taxpayers. She was able to identify this fraud in her position as Assistant Controller of U.S. Government Accounting and Sarbanes-Oxley compliance.  

Fraud exists in every industry, but companies that collect a significant portion of their revenue from government payments might be more prone to dishonest billing and similar practices. Dishonest businesses and individuals could believe that overcharges will get overlooked within the large bureaucracy associated with national defense or Medicare. This is why False Claims Act cases initiated by vigilant employees are so critical.  

Along with her allegations that Sikorsky and Derco were collaborating to submit false vouchers, Patzer also claimed that she was the victim of unlawful retaliation because she was fired after seeking answers from her supervisors about the potential misconduct she had identified. Whistleblowers frequently have similar stories of adverse job actions after they make their report, though in many cases, like Patzer’s, the company claims that the dismissal was part of a standard reduction in force that was unrelated to the employee’s status a whistleblower.  

Kardell Law Group provides strong legal advocacy to qui tam plaintiffs who have identified fraud against the government as well as victims of workplace retaliation. If you’re aware of false vouchers submitted to a government department or have been demoted or fired because you spoke up about a problem, we can help.