Insitu, an aerial drone manufacturer based in Bingen, Wash., will pay $25 million to settle allegations that the company outfitted the drones with used components rather than new parts.
The settlement resolves allegations filed in a lawsuit by D. R. O’Hara, a former executive of Insitu, that the company “knowingly submitted materially false cost and pricing data” for contracts with federal government agencies, according to a Department of Justice statement released earlier this month.
In court filings, the DOJ alleged that Insitu entered into five non-competitively bid contracts with the U.S. Navy and two contracts with U.S. Special Operations Command (SOCCOM) between 2009 and 2017, deliberately inflating prices using cost and pricing data for new parts and materials, while planning to use recycled parts.
According to the DOJ statement, the lawsuit was filed under whistleblower provisions of the False Claims Act, which permits private individuals to sue on behalf of the government for false claims and to share in any recovery.
“We expect companies that seek to do business with the government to provide complete and accurate information so contract prices can be negotiated on a level playing field,” said Acting Assistant Attorney General of the Justice Department’s Civil Division Jeffrey Bossert Clark in the DOJ statement.
O’Hara told The Seattle Times that he lodged a complaint in 2014 to Boeing’s internal ethics hotline, which was reported to Insitu, resulting in his termination. As part of the settlement, O’Hara will receive $4.625 million of the sum.
Insitu denies any claims made in the court filings.
In a statement made to Columbia Gorge News, Insitu spokesperson Jenny Beloy said that “the agreement between Insitu and the U.S. Government resolves a complex case regarding the pricing of Unmanned Aircraft System (“UAS”) contracts in which Insitu provided Intelligence, Surveillance, and Reconnaissance (“ISR”) services. We cooperated fully with the government during the course of its investigation and, as reflected in the settlement, maintain that our disclosures to the government at the time satisfied all requirements, as they do today.”
Asked further if Insitu is expecting any impacts beyond its pocketbook, Beloy said that the company does not anticipate financial impacts to the company or community.
“Even so, any event like this presents an opportunity to reflect on our business, and we will continue to focus on our internal controls and compliance,” said Beloy.
The settlements were the result of a coordinated effort by the Commercial Litigation Branch (Fraud Section) of the Civil Division of the Department of Justice, the United States Attorney’s Office for the Western District of Washington, the Naval Criminal Investigative Service, the Defense Contract Audit Agency, and the Defense Criminal Investigative Service.
“Taxpayers deserve to get what they paid for — especially in significant no-bid military contracts,” said U.S. Attorney Brian T. Moran in the DOJ statement. “Cases such as this one should be seen as a warning to defense contractors that false claims have no place in military purchasing.”