CORPORATE CRIME REPORTER
Boeing Pays $4.3 Million to Settle False Claims Case, Major Media Look the Other Way
26 Corporate Crime Reporter 7, February 8, 2012
Last month, Boeing was forced to pay $4.3 million to resolve federal allegations that it improperly billed the Pentagon for work at the company’s Ridley Park, Pennsylvania facility.
Here’s the remarkable thing about the case.
Hardly any major media noticed.
Not the New York Times.
Not the Washington Post.
Not the Wall Street Journal.
Not the Associated Press.
Not Reuters.
Not Politico.
Not the Financial Times.
Only Bloomberg and a few regional and legal outlets.
Why?
Michael Morse is a partner at Pietragallo Gordon Alfano Bosick & Raspanti – the firm that represented the whistleblower against Boeing in the case.
Morse says that one explanation for the lack of coverage is that the case was unsealed on a Friday afternoon – January 20, 2012.
Patrick Burns of Taxpayers Against Fraud says another explanation is that in an age where billion dollar False Claims Act settlements are common place, a $4 million settlement might not stack up in a reporter’s eyes.
Another possible explanation is that the press release was sent out only from the U.S. Attorney’s office in Philadelphia. It didn’t go the main Justice Department press list – which includes all of the larger media outlets.
And another possible reason – why would a magazine like Politico, for example, run a story on Boeing defense fraud – when in they take so much money from Boeing to run slick ads?
(Just to check on this, I opened my Politico this morning and there on page 7 was the requisite ad from Boeing.)
But Morse says the case shouldn’t be overlooked.
Morse is seeing an uptick in False Claims Act cases coming in the door against major defense contractors.
Not that defense fraud will budge health care fraud from the number one qui tam spot anytime soon.
But big defense fraud is clawing its way back up the charts.
And the Boeing case might be a harbinger of things to come.
In 2003, the United States Department of Defense awarded Boeing contracts to produce and modify Chinook helicopters as part of the Army's effort to modernize its fleet of heavy lift helicopters.
More than 100 new Chinooks were ordered, and Boeing also agreed to “remanufacture” several hundred older Chinook helicopters by overhauling their airframes to accommodate upgrades of the helicopter's avionics and engines.
The Ridley Park plant is the principal site where this work is performed.
The vast majority of the work performed in the Chinook remanufacturing program was paid based on a pre-negotiated price.
A federal investigation revealed that several Boeing managers instructed the mechanics assigned to the Chinook program to perform other, non-billable work while separately billing the United States for their time, resulting in the government being charged for work for which it had already paid.
The lawsuit was brought by current Boeing employee Vincent A. DiMezza, Jr.
He’ll pocket 18.5 percent of the $4.3 million award if the judge approves the settlement.
DiMezza, a former United States Marine, has worked for Boeing since 2007, currently serving as a production manager in the Chinook Helicopter Program at Boeing’s plant in Ridley Park.
The Department of Justice joined DiMezza, who filed his whistleblower lawsuit in federal court in 2010, in alleging that Boeing had engaged in a pattern and practice of submitting false and fraudulent claims for modification work performed under a government contract with the United States Department of Defense to produce, maintain, repair and/or modify the Chinook CH-47D and MH-47 helicopters.
To ensure that the problem does not persist at Ridley Park, the settlement requires Boeing to implement several independent remedial measures, including both retraining of its employees and technological improvements in the software Boeing uses to track its billing.
Over the next few years, Boeing will also implement a new labor tracking computer system for its defense manufacturing facilities nationwide, and it has agreed to implement similar technological measures where appropriate to help ensure that a similar problem does not occur at other facilities.
“The False Claims Act was originally passed to combat defense procurement fraud,” said U.S. Attorney Zane David Memeger. “It remains a critical weapon in the Department of Justice's battle to ensure that every taxpayer dollar is spent as efficiently and honestly as possible. The Department of Justice and United States Attorney's Offices across the country are committed to rooting out frauds like this one, to recouping the taxpayers' money, and to putting in place the mechanisms necessary to ensure that the offender will not commit such a fraud again.”
Memeger complimented DiMezza for coming forward.
“Some of the most important cases begin with a citizen who sees something wrong and speaks up,” Memeger said. “Whistleblowers who notify the government of possible fraud allow us both to correct that specific problem and to prevent similar misconduct from recurring in the future. Everyone benefits from cooperation between the government and an active, alert community.”
The Court has scheduled a hearing on the settlement agreement for February 27, 2012.
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