FOR IMMEDIATE RELEASE

CIV

THURSDAY, NOVEMBER 9, 2000

(202) 514-2007

WWW.USDOJ.GOV

TDD (202) 514-1888

 

NASA SPACE SHUTTLE CONTRACTORS SETTLE FRAUD

ALLEGATIONS BOEING, UNITED SPACE

ALLIANCE TO PAY FINE

 

WASHINGTON, D.C. — The Boeing Company of Seattle and Houston-based United Space Alliance have agreed to pay a total of $825,000 and to give up their rights to $1.2 million in unpaid invoices to settle allegations relating to false claims submitted to the government between 1986 and 1992 under the National Aeronautics and Space Administration’s (NASA) Space Shuttle and Space Station Freedom programs, the Justice Department announced today.

At the time the false claims were submitted, Rockwell Space Operations Company (RSOC) – later purchased by Boeing – had a contract with NASA to manage the two programs. Omniplan Corporation – an RSOC subcontractor – allegedly engaged in numerous fraudulent schemes that resulted in overbilling the United States millions of dollars. In 1996, Boeing purchased RSOC and United Space Alliance took over management of the two NASA programs. Both companies assumed liability for RSOC’s misconduct and agreed to re-pay the overcharges.

In 1993, the United States sued Omniplan and secured a consent judgment, but the company went bankrupt before it was able to pay the full judgment. On January 11, 2000, the government filed a civil suit alleging that RSOC violated the False Claims Act by knowingly submitting to NASA the improper Omniplan invoices. The complaint alleged that RSOC knew or should have known that the subcontractor’s invoices contained false claims.

“Prime contractors cannot turn a blind eye to fraud by their subcontractors,” said Assistant Attorney General David W. Ogden of the Justice Department’s Civil Division. “They may not merely turn in subcontractor bills to the government without removing clearly unallowable costs.”

The government’s civil lawsuit alleged that between 1986 and 1993, RSOC told NASA that all of the costs of Omniplan were reasonable, allowable and allocable to the space agency contracts. However, the government alleged that the RSOC invoices included large amounts of fraudulent costs.

According to the suit, Omniplan commingled personal expenses with its corporate accounts, including operating a pizza delivery company out of a building RSOC was billing to NASA and established phony companies in order to lease buildings and equipment to itself at inflated values. The subcontractor also included in its general and administrative account, large amounts of personal expenses such as costs relating to personal homes, a ski lodge, expensive jewelry and numerous personal vacations to Argentina, Nepal and Singapore.

In 1995, the owner of Omniplan, Ralph Montijo, pleaded guilty to numerous felony violations of United States laws regarding Omniplan’s fraudulent practices, and he served two years in jail.

Under the False Claims Act, the government is entitled to treble damages plus civil penalties ranging from $5,000 to $10,000 per violation when a person or a company acts with either actual knowledge or with deliberate ignorance or reckless disregard for the truth.

The civil lawsuit resulted from an investigation by NASA Office of Inspector General, Office of Criminal Investigations, assisted by the Defense Contract Audit Agency.

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00-657

Link:  http://www.usdoj.gov/opa/pr/2000/November/657civ.htm

 

 

 

 

 

Whistleblower Suits Limited in Court in Boeing Case (Update 5)

 

 

By Greg Stohr

March 27 (Bloomberg) — The U.S. Supreme Court limited the ability of whistleblowers to collect damages in suits claiming fraud against the federal government, siding with Boeing Co. in a case stemming from safety issues at a Colorado nuclear plant.

The court, voting 6-2, said retired engineer James S. Stone can’t share in a $4.2 million award he and the U.S. government had won in a suit against Rockwell International, now part of Boeing. The ruling, which reversed a lower court, might also bar Stone from collecting legal fees.

The decision reduces the incentive for individuals to press claims under the U.S. False Claims Act, which lets whistleblowers sue on behalf of the federal government and then share in any recovery. Although Chicago-based Boeing still will have to pay the full award, Stone won’t be able to collect any of it.

Stone accused the company of making false statements about environmental, health and safety activities at its Rocky Flats nuclear weapons facility outside Denver. The government later joined his suit against Rockwell.

The high court dispute centered on the requirement that whistleblowers be the “original source” of information about wrongdoing. The majority said Stone didn’t meet that requirement because the focus of the case shifted during the litigation and the jury’s findings against the company weren’t based on information he provided.

Independent Knowledge

“Stone did not have direct and independent knowledge of the information upon which his allegations were based,” Justice Antonin Scalia wrote for the court. Chief Justice John Roberts and Justices Anthony Kennedy, David Souter, Clarence Thomas and Samuel Alito joined Scalia in the majority.

Justices John Paul Stevens and Ruth Bader Ginsburg dissented, saying the majority had misinterpreted the False Claims Act. Stevens said the court should have focused on “the facts in the public domain at the time the action is commenced.”

The ruling likely will reduce “fishing expeditions” among relators, as whistleblowers are known under the False Claims Act, according to Peter Hutt, a government contracts lawyer at Miller & Chevalier in Washington.

“This decision will discourage relators from filing targeted actions and then seeking to recover on bases other than those on which they have first-hand knowledge,” Hutt said.

Iraq Contracts

Hutt said the ruling might affect pending cases claiming fraud by companies involved in the reconstruction of Iraq.

The National Whistleblower Center, a Washington-based group that helps whistleblowers, called the decision a “disastrous ruling” that has “cut the legs off of America’s most effective anti-fraud law.”

Boeing spokesman John Bernaden said the company is “very pleased” with the ruling. Boeing shares fell 31 cents to $90.52 as of 4:16 p.m. in trading on the New York Stock Exchange.

Stone’s lawyer, Maria Vullo, declined through a secretary to comment.

Stone worked at Rocky Flats until 1986, when he was laid off. While there, he questioned the company’s plan for disposing of toxic sludge by mixing into cement.

Soon after his departure, Stone began giving information to the Federal Bureau of Investigation and the Environmental Protection Agency about various environmental, safety and health problems at the plant. The government’s investigation culminated in 1992, when Rockwell pleaded guilty to 10 federal environmental violations.

In the civil case, a jury concluded that Rockwell had defrauded the government from April 1987 to September 1988, after Stone had left the company. The Denver-based 10th U.S. Circuit upheld the award.

The high court, in reviewing the case, declined to consider Boeing’s broader argument that the False Claims Act is unconstitutional.

The case is Rockwell v. United States, 05-1272.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net.

Last Updated: March 27, 2007 16:19 EDT

Link:  http://www.bloomberg.com/apps/news?pid=20601103&sid=aFZ1jMOcfNwo&refer=us

 

 

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