Sikorsky Support Services Inc. and Derco Aerospace Inc. Settle False Claims Allegations with $70 Million Payment

Sikorsky Support Services Inc. (SSSI) and Derco Aerospace Inc., subsidiaries of United Technologies Corporation at the time of the alleged misconduct, have reached a $70 million settlement with the United States Department of Justice over False Claims Act violations. The settlement resolves accusations that the companies overcharged the U.S. Navy for spare parts and materials essential for naval aircraft maintenance.

The settlement stems from allegations filed under the qui tam provisions of the False Claims Act by relator Mary Patzer. According to court documents, SSSI and Derco engaged in an unlawful subcontracting practice known as cost-plus-percentage-of-cost (CPPC). Under this arrangement, SSSI purchased parts from Derco at costs derived from other suppliers plus a fixed 32% markup. These costs were then billed to the Navy without disclosing the nature of the subcontract, which violates federal statutes and contractual obligations.

The United States alleged that these actions resulted in the submission of false and fraudulent cost vouchers to the Navy. This practice not only violated contractual terms but also inflated costs borne by U.S. taxpayers, impacting the efficiency and integrity of defense procurement processes.

Under the terms of the settlement:

• SSSI and Derco will pay a total of $70 million to resolve the allegations.
• Of the settlement amount, $36,467,990 constitutes restitution to the government, with an additional 4% annual interest from June 15, 2024.
• Relator Mary Patzer, who initially brought the allegations forward, will receive $13,976,900 as her share of the recovery, plus a portion of the interest accrued.

The settlement, documented in a formal agreement, also includes provisions for the release of civil and administrative claims related to the covered conduct, while reserving rights for certain exceptions such as criminal liabilities and other specific claims.

Statements and Consequences

Principal Deputy Assistant Attorney General Brian M. Boynton emphasized the importance of contractors adhering to legal and contractual obligations, stating, "Government contractors must ensure their subcontracting arrangements comply with the law and with their contractual obligations." U.S. Attorney Gregory J. Haanstad for the Eastern District of Wisconsin echoed these sentiments, underlining the government's commitment to safeguarding taxpayer funds from fraud.

The settlement agreement concludes years of investigation and litigation initiated by whistleblowers and supported by extensive government scrutiny. It serves as a stark reminder of the consequences for contractors who engage in fraudulent practices within federal procurement.

This settlement not only resolves the immediate financial obligations but also underscores the government's resolve to uphold transparency and accountability in defense contracting. The case highlights the significant role of whistleblowers in exposing wrongdoing and the Justice Department's commitment to pursuing claims under the False Claims Act.

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