Lockheed agrees to settle Deepwater False Claims lawsuit

Former Deepwater engineer-turned-whistle-blower Michael DeKort has settled his False Claims Act lawsuit against Lockheed Martin Corp. for an unspecified sum of money, DeKort and Lockheed Martin announced today.

However, DeKort said he is continuing to pursue the lawsuit against the other defendants in the case, Northrop Grumman Ship Systems Inc. and Integrated Coast Guard Systems Inc., which is a joint venture of Lockheed Martin and Northrop Grumman.

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DeKort was a lead systems engineer at Lockheed Martin who worked on the Coast Guard’s $27 billion Integrated Deepwater System program in 2003. He subsequently left the company, and in 2006, he filed a False Claims lawsuit against Deepwater contractors Lockheed Martin, Northrop Grumman and Integrated Coast Guard Systems.

A judge in the U.S. District Court for the Northern District of Texas approved the settlement between DeKort and Lockheed Martin on Dec. 1. The settlement had been agreed to in principal in October, just before the trial was to begin.

“Shortly before the jury trial was scheduled to begin, I reached an agreement with Lockheed Martin to settle the case against Lockheed Martin only,” DeKort said in a statement released today. "This avoided the uncertainty and expense of litigation against it."

The judge also dismissed DeKort’s claims against Northrop Grumman and Integrated Coast Guard Systems. The court ruled that DeKort’s allegations were based on “public disclosures of the claims, not from his personal own [sic] knowledge,” according to a statement released today by attorney Samuel Boyd of Dallas, who is DeKort’s co-lead counsel along with attorney Jim Helmer of Helmer, Martins, Rice and Popham of Cincinnati.

However, DeKort is appealing that dismissal at the U.S. District Court, and if he is not successful there, he intends to file with the Fifth Circuit Court of Appeals to reinstate the lawsuit against Northrop Grumman and Integrated Coast Guard Systems, according to Boyd.

Under the False Claims Act, a whistle-blower case may win damages for the government and the whistle-blower. As of July 2009, the amount of damages sought for the government in this case was $720 million, and DeKort would have been entitled to about $250 million if the lawsuit was successful.

“We are pleased with the confidential agreement with Lockheed Martin and are vigorously pursuing the unsettled claims against Integrated Coast Guard Systems and Northrop Grumman Ship Systems Inc. on behalf of the United States and our client,” Boyd said.

"Lockheed Martin vigorously disputed Mr. DeKort’s assertions,” according to a statement released by a Lockheed Martin spokesman today. “Nonetheless, Lockheed Martin and Mr. DeKort settled the remaining issues amicably in order to avoid the expense and disruption of a jury trial. The agreement specifies that neither party will disclose terms of the settlement.”

"Lockheed Martin continues to meet delivery and performance milestones under our remaining Deepwater task orders, and we are prepared to continue to support the U.S. Coast Guard in its critical national security missions,” according to the Lockheed Martin statement.

The case involved several allegations claiming the contractors’ experienced serious deficiencies in performance of the Deepwater boat construction programs, including the conversion of existing patrol boats. Lockheed Martin was involved in installing new communication, navigation and control equipment in the boats. The Coast Guard rejected eight of the converted patrol boats as structurally unsound.

DeKort was a Lockheed Martin employee from 1992 to 2006 and was assigned to be lead systems engineer for the Deepwater project in 2003. He initially raised concerns internally but later brought his complaints to the Homeland Security Department's Office of Inspector General and Congress.

The Coast Guard is seeking a refund of $96 million that it had paid for the eight patrol boats it rejected. According to Boyd, if DeKort is successful in his case against Northrop Grumman and Integrated Coast Guard Systems, it would enable the Coast Guard to recover at least that amount.