Monday, February 11, 2019

Energy Department Contractor Sued by Justice Department

The Department of Justice filed a civil lawsuit last week against a contractor providing security, fire protection, utilities, and information technology at DOE's Hanford (Washington) site accusing it of defrauding DOE of tens of millions of dollars.

At the time the fraud occurred, the contractor, Mission Support Alliance (MSA) was principally owned by Lockheed Martin. Also named in the Justice Department suit was two other Lockheed divisions and the former President of MSA, a Lockheed employee.

In 2010, MSA awarded a $232 million subcontract for information technology services to Lockheed Martin Services, Inc. Between 2010 and 2015, MSA misrepresented billing rates charged to DOE which allowed MSA to obtain grossly inflated and improper additional profit on the subcontract. Lockheed was doubling up on profit. The subcontractor owned by Lockheed was earning profit on its work and MSA, owned by Lockheed, earned profit on the work performed by the Lockheed-owned subcontractor.

The Justice Department has accused MSA of using half-truths, omissions, kickbacks, and outright lies to get the Energy Department to consent to the subcontract with its sister division. The kickback charge is interesting. The President of MSA, Armijo, was also a vice president of Lockheed. He and other employees were paid millions of dollars in cash and stock as part of an incentive program for improperly using their MSA positions to provide favorable treatment for Lockheed.

For its part, MSA (now owned by a new company) and Lockheed deny the allegations of fraud, corruption, and self-dealing and vow to "defend this matter vigorously". One minor figure in this matter, the former CFO, has already paid $124 thousand to resolve his liability and agreed to cooperate in the federal investigation. In agreeing to the civil settlement, he denied any wrongdoing.

The Justice Department press release on this matter can be found here.

No comments:

Post a Comment