The Justice Department on Tuesday said that shipbuilder Huntington Ingalls Industries [HII] has agreed to a $9.2 million settlement over alleged billing violations on Navy and Coast Guard ship contracts.
The company previously made payments of $1.3 million, so under the settlement it will pay an additional $7.9 million to resolve a lawsuit by a former HII employee over labor mischarging allegations under the whistleblower provisions of the False Claims Act.
Despite the settlement, there has been no determination of liability, the Justice Department said.
The settlement in the department’s Southern District of Mississippi dates back to 2003 for work done on Navy and Coast Guard ships at HII’s Ingalls Shipbuilding division in Pascagoula, Miss. There, the company builds amphibious assault ships for the Navy and the Coast Guard’s National Security Cutter.
“Our Armed Forces depend on defense contractors to follow the rules, and this civil settlement, the second largest in the District’s history, should remind all those who conduct business with the United States Government that they are expected to abide by the rules,” Harold Brittain, acting U.S. Attorney, said in a statement. He said his District “will remain vigilant in identifying and prosecuting those involved in nefarious activities and fraudulent billing, which ultimately result in substantial cost overruns on Navy and Coast Guard shipbuilding projects.”
In a statement on Tuesday, HII said “The company informed the Government of alleged misconduct by certain employees and fully cooperated with the Government in investigating and reaching a resolution of the matter. The company has strengthened its compliance program to help ensure that no similar issues arise in the future.”
In its latest annual report, called a 10-K, filed with the Securities and Exchange Commission in February, HII said that in 2013 it disclosed to the Departments of Defense and Homeland Security that it had begun an internal investigation into possible “mischarged time or misstated progress on Navy and Coast Guard contracts” at Ingalls. The filing said that the Navy was provisionally withholding $4.7 million in payments on existing contracts with the likely amount of mischarging expected to be no more than $3.1 million. The Coast Guard in June 2014 told the company it was provisionally withholding $3.6 million in contractor payments.
HII said in the 10-K that based on its investigation, the estimated mischarging was about $4 million.
The Justice Department said the settlement also “resolves claims disclosed by HII that it had billed the Navy and Coast Guard for dive operations to support ship hull construction that did not actually occur as claimed.”
Bryan Faulkner, a former HII employee who brought the original lawsuit against the company over the alleged mischarges, will receive $1.6 million as a result of the civil action he filed.