Justice Department probes Sikorsky on Navy contract overbilling accusation

Government accuses subsidiaries of adding profit and overhead costs to the price of spare parts.

July 27, 2015   by The Associated Press

HARTFORD, Conn. — The Justice Department has launched a criminal probe into allegations that subsidiary helicopter maker Sikorsky and two subsidiaries overbilled the Navy, United Technologies Corp. said.

The aerospace and building systems conglomerate said in a regulatory filing that the government accuses the subsidiaries of adding profit and overhead costs to the price of spare parts.

The government filed a complaint last October in federal court that Sikorsky and subsidiaries, Derco Aerospace and Sikorsky Support Services Inc., violated the False Claims Act in connection with the 2006 Navy contract. The contract was to support the Navy’s T-34 and T-44 fixed-wing turboprop training aircraft.

SSSI subcontracted with Derco primarily to procure and manage spare parts for the training aircraft.


The government alleges that SSSI submitted false cost certifcates for 2006 through 2012.

“We believe that Derco was lawfully permitted to add profit and overhead to the cost of the parts and maintain that SSSI did not submit any false certificates,” the Hartford, Connecticut-based United Technologies said. “We also believe that we have other substantial legal and factual defences to the government’s claims.

The government is seeking damages of about $45 million that could be tripled, in addition to penalties of about $13 million. The total could amount to $148 million.

“Although we continue to evaluate liability and exposure, we do not currently believe that it is probable that we will incur a material loss,” United Technologies said.

If the government prevails, the outcome could have a material adverse effect on results of operations in the period in which a liability would be recognized and on cash flows for the period in which damages would be paid.

Sikorsky and its subsidiaries intend to co-operate fully, the company said.

Lockheed Martin Corp., which recently agreed to buy Sikorsky for $9 billion, said it was aware of the issue during due diligence and negotiations and will monitor it.

© 2015 The Canadian Press

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