Lockheed Martin Corp. reached a $10.28 million settlement with the Justice Department to resolve a case involving allegations that the defense contractor over billed the Air Force and the Navy for a light/medium tactical transport aircraft.
According to the U.S. Attorney's Office in Atlanta, Lockheed Martin’s aircraft manufacturing division in Marietta inflated the overhead rates that it used to price and bill government contracts performed for the U.S. Air Force and U.S. Navy from 1996 until 2000.
Lockheed Martin spokesman Joe Stout said the company was not admitting liability but settled the case because it was “in the best interest of both parties.”
“Lockheed Martin has agreed to settle a long standing case with the U.S. Government over cost accounting charges in connection with the development and marketing of the C-27J aircraft,” Stout said in an email. “The case involved a disagreement on how certain types of costs should be accounted for under government cost accounting regulations. Due to the complexity of the regulations and the differing interpretations of those regulations, Lockheed Martin and the government have mutually agreed to settle the matter.”
The federal investigation was based on the False Claims Act and an agreement the Lockheed Martin had with Alenia Aerospazio, an Italian aerospace company, to make system upgrades to the “C27J.”
According to the U.S. Attorney’s Office, Lockheed improperly billed the Navy and Air Force for costs of the private venture with Alenia Aerospazio.
“It is troubling that a large defense contractor with long-established contractual ties with the United States failed to follow basic accounting rules and submitted claims for costs for which reimbursement was not permitted,” U.S. Attorney Sally Quillian Yates said in the settlement announcement Friday. “Lockheed Martin’s mischarging created a significant unintended subsidy for one of Lockheed Martin’s commercial ventures, and that is unacceptable.”
But there have been other instances of Lockheed Martin, based in Bethesda, Md., overbilling or making account errors that led to settlements with the government.
In 2000, Lockheed paid the government $5 million to settle claims that the company's Marietta and Nashua, N.H., subsidiaries overcharged the Navy for anti-submarine devices. Federal prosecutors said the government paid $1.8 million to $3.8 million too much for the devices.
Three years later Lockheed Martin paid $37.9 million to settle charges that it inflated costs on four Air Force contracts, intending to use the extra money to offset cost overruns on other Air Force projects.
Lockheed, with nine U.S. locations including Marietta, had sales last year of almost $45.2 billion.
In Marietta, Lockheed is home to the C-130J Super Hercules transport and the F-22 Raptor air dominance fighter. It also has the avionics and engine modernization programs for the C-5 Galaxy strategic transport and the P-3 Orion program operations, including the new wing production line.
