Lockheed Martin subsidiaries reach $70 million settlement for claims they overcharged Navy for parts

STRATFORD, Conn. — Two Lockheed Martin subsidiaries have agreed to pay the federal government $70 million for overcharging the Navy for aircraft parts, the U.S. Department of Justice announced Friday.

The federal agency says Sikorsky Support Services, based in Stratford, Connecticut, and Derco Aerospace, headquartered in Milwaukee, Wisconsin, knowingly entered into an improper subcontract for spare parts and materials for aircraft used to train Navy pilots.

Under the contract, Sikorsky purchased the parts from Derco at the cost Derco paid to other suppliers, plus a 32% markup.

Sikorsky then billed the Navy for the price it paid to Derco, in violation of federal regulations prohibiting such arrangements, which prosecutors say drive up government costs.

“Today’s settlement demonstrates that the Department of Justice will ensure that government contractors do not circumvent the law and engage in self-dealing that can artificially inflate their burdens at the expense of American taxpayers,” said Brian Boynton, chief of the civil division of the DOJ. in a statement.

Maryland-based Lockheed Martin said in a statement Friday that it is “pleased that the settlement will bring this matter to a close,” noting that there was also no wrongdoing by Sikorsky or Derco Aerospace.

Prosecutors said the settlement resolves a lawsuit filed by a former Derco employee under the whistleblower provision of the federal False Claims Act. The case goes back to 2011, or a few years before Lockheed Martin acquired Sikorskythe maker of the Army’s Black Hawk helicopters, in 2015.

Darrin Jones, of the Defense Department’s Office of Inspector General, said the settlement should act as a deterrent to those who want to abuse the agency’s procurement process.

“Excessive inflation of parts and material costs for aircraft repair and maintenance has damaged the Navy’s air training and is a disservice to the American taxpayer,” added Greg Gross of the Naval Criminal Investigative Service’s Economic Crimes Field Office.