The U.S. sells defense articles and services to foreign countries when the President finds that to do so will strengthen the security of the U.S. and promote world peace. These are called Foreign military sales or FMS for short. FMS contracts require prime contractors to be American companies and also, requires that the American companies perform a substantial portion of the work.
ABS Development Corporation is a Delaware corporation based in New York. It is also a subsidiary of Ashtrom International, Ltd. of Israel. The Army awarded an FMS contract to ABS for renovation of the Haifa shipyard in Israel without realizing that ABS was not American owned but instead owned by an Israeli conglomerate. It fact, ABS when out of its way to hide its true ownership.
To exacerbate matters, ABS didn't perform any of the work, allowing its parent company, Ashtrom, to do it all.
When the allegation of foreign ownership surfaced, investigators from DCIS (Defense Criminal Investigative Service) and from the Army CIC (Criminal Investigation Command) initiated investigations
As a result of these investigations, ABS agreed to pay $2.8 million and forgo $16 million in potential administrative claims to settle allegations it violated the False Claims Act by fraudulently obtaining FMS contracts. ABS agreed to the $18.8 million settlement without admitting liability.
More information on this case is available through the Justice Department press release.
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