Lockheed to pay $15.9M in false claims settlement

Friday - 3/23/2012, 12:33pm EDT

This story was updated at noon Friday to include comments from a Lockheed spokesman.

Lockheed Martin Corporation will pay $15.85 million to settle allegations that one of its subcontractors overcharged the government, according to a release from the Department of Justice.

The settlement involves a Lockheed subcontractor, Tools & Metals Inc., which DoJ alleges sold "perishable tools" at an inflated cost to the government between 1998 and 2005. These tools were used on military aircraft, including the F-22 and F-35 fighter jets, DoJ said.

DoJ brought civil claims against Lockheed Martin under the False Claims Act, which helps the government recover funds stolen through fraud by contractors.

"Specifically, the government alleged that Lockheed Martin acted recklessly by failing to adequately oversee TMI's charging practices and by mishandling information revealing these practices," the release said.

In 2005, Todd B. Loftis, a former president of TMI, pleaded guilty and was sentenced to seven years in prison in connection with his role in TMI's scheme, DoJ said.

"It is troubling that a large defense contractor with long-established contractual ties with the United States failed to undertake appropriate measures to ensure the integrity and validity of the costs it submitted to the United States," said Stuart F. Delery, acting assistant Attorney General for DoJ's Civil Division, said in a statement.

The False Claims Act allows private parties to receive a portion of the recovered funds. In this case, two whistleblowers will split $2 million of the government's recovery.

A Lockheed spokesman said in an email that DoJ notified Lockheed of the investigation into TMI in late 2007.

"We fully cooperated with the investigation, which led to the prosecution and conviction of the TMI president. At no time did we knowingly engage in any inappropriate billing, but in an effort to close the matter in a timely manner, we have agreed to the settlement," said Joe Stout, company spokesman, in an email to Federal News Radio.

He added, "As a result of the investigation, Lockheed Martin has taken steps to ensure that its oversight of supplier management remains vigorous and that applicable controls are uniformly applied. We remain committed to upholding the highest standards of ethics in every aspect of our business."