Lockheed pays millions to settle False Claims allegations

The federal government's overpayment for tools to make fighter jets has led to a $15.85 million settlement between Lockheed Martin Corp. and the Justice Department, the agency announced on March 23.

While the defense contractor has not admitted wrongdoing, the payment resolves False Claims Act allegations, as the government alleged that Lockheed subcontractor Tools & Metals Inc., an aeronautics business tooling supplier, inflated costs for military aircraft tool orders for the government.

A private party can file an action and receive a portion of the settlement under the False Claims Act. In this case, two whistleblowers will split $2 million of the funds.

The Justice Department brought a civil suit against Lockheed and charged them for acting “recklessly.” Specifically, the government said that the contractor did not properly oversee Tools & Metal’s charging practices and mishandled information that revealed the deleterious pricing.

Stuart F. Delery, acting assistant attorney general for the Justice Department’s civil division, called Lockheed’s actions “troubling,” because of its failure to pursue the “validity of the costs submitted…,” according to the announcement.

Between 1998 and 2005, the subcontractor allegedly overinflated the prices of perishable tools, such as drill bits, cutters, router bits, reamers and sockets used in manufacturing F-22s, F-35s and other military aircraft made by Lockheed for the Defense Department. In December 2005, former Tools & Metals president Todd Loftis, pleaded guilty and was sentenced to seven years in prison for the scheme, according to the Justice Dept. announcement.

In late 2007, Lockheed Martin said the Justice Department notified it of the ongoing investigation into the billing practices of Fort Worth, TX-based Tools & Metal.

“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 a settlement,” said Joe Stout, director of communications of Lockheed Martin Aeronautics, in a statement.

"As a result of the investigation, Lockheed Martin has taken steps to ensure that its oversight of the supplier management process 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,” he added.

Lockheed Martin Corp., of Bethesda, Md., ranks No. 1 on Washington Technology’s 2011 Top 100 list of the largest federal government contractors.

About the Author

Alysha Sideman is the online content producer for Washington Technology.

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