Defective Electronic Components Can Be The Basis For Large Defense Contractor Whistleblower Reward Lawsuits by Defective Electronic Component Whistleblower Reward Lawyer Jason S. Coomer 

Defective electronic components used in missile defense systems, military aircraft, weapons, and other military equipment can play our troops and security in jeopardy and be the basis of large defense contractor whistleblower reward lawsuits.  For this reason, the United State government is offering large financial rewards to professionals who properly expose electronic component fraud and false certification of electronic components. 

If you are aware of defense contractor who is committing electronic component fraud or false certification of electronic components, please feel free to contact Electronic Component Fraud and False Certification Whistleblower Reward Lawyer Jason Coomer, for a free and confidential online review of your potential Whistleblower Reward Lawsuit.  Feel free to also use our online submission form.  Please make sure you contact us through a secure e-mail address and/or telephone line. 

Over a Million Fake or Defective Electronic Components Have Been Used by Government Contractors In United States Aircraft Many of these Fake Parts May Have Come from China or other Parts of Asia

In 2011, the United States Senate Armed Services Committee announced that it had uncovered 1,800 cases in which the Pentagon had been sold defective electronics many of which  may be counterfeit.  In total, the committee said it had found more than a million defective electronic parts had made their way into military aircraft.  Many of these defective electronic components had come from defective supply chains and fraudulent sub contractors.  These defective electronic components can create catastrophic problems when used in military aircraft, weapons, missile defense systems, surveillance systems, and other security systems.  

Manhattan U.S. Attorney Announces Settlement With Department Of Defense Weapons Parts Supplier For Procurement Fraud

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has filed and simultaneously settled a civil fraud lawsuit against Electrical & Electronic Controls, Inc. (“E&E”), a small distributor of electrical components, for knowingly supplying the United States Department of Defense (“DoD”) with non-conforming electrical and other parts critical to weapons performance and operation, that later turned out to be defective. The Complaint was filed on March 21, 2013 in Manhattan federal court and the settlement was approved Friday by U.S. District Court Judge William H. Pauley, III.

Manhattan U.S. Attorney Preet Bharara said: “As E&E admitted, they provided less expensive unapproved parts to our Department of Defense, conduct that jeopardized both the flawless functioning of our weapons system and the safety of those who operate it. This Office is committed to ensuring that the U.S. Government gets what it pays for, and pursues those who would mislead it.”

According to the allegations contained in the Complaint:

From 2004 through 2007, E&E bid on and entered into fourteen contracts with the DoD. Under those contracts, E&E was required to supply parts from specific manufacturers that had been vetted and approved by the DoD for the quality of their products. Instead, E&E knowingly supplied less expensive parts from unapproved sources to the DoD. Twelve of the 14 contracts involved Critical Application Items, i.e., items that are essential to weapon system performance or operation, or the safety of operating personnel. In addition, many of the substituted parts turned out to be defective and unusable, costing the DoD hundreds of thousands of dollars.

As part of the settlement, E&E admitted, acknowledged, and accepted responsibility for repeatedly substituting less expensive parts from unapproved sources, and misrepresenting the source of the parts it then supplied to DoD. E&E must also pay $250,000 to the United States under the False Claims Act.

Mr. Bharara praised the investigative work of the DoD in this case.

Assistant U.S. Attorney Jaimie L. Nawaday is in charge of the case.

Coos Bay Company, Its Owner and Six Employees Indicted for Fraud on Defense Contracts

EUGENE, Ore. — A Coos Bay business, its owner, and six employees were arraigned in federal court today on an indictment returned by a federal grand jury on December 14, 2011. The indictment alleges that Kustom Products, Inc. (KPI), a vehicle parts supply business located in Coos Bay, Oregon, its owner, and six employees committed fraud on contracts with the United States Department of Defense (DoD) valued at over $7.5 million. The indicted owner is Harold Ray Bettencourt II. The indicted employees are Bettencourt’s former wife (Kathy Sue Bettencourt), three of his sons (Harold Ray Bettencourt III [Bo], Nicholas Ryan Bettencourt and Peter Tracy Bettencourt), his office manager (Margo Antonette Densmore), and his purchasing agent (Joshua Lee Kemp). The indictment alleges that KPI, Bettencourt, and the others committed wire fraud, conspiracy to commit wire fraud, fraud involving aircraft parts, money laundering, and conspiracy to commit money laundering. It also alleges that all proceeds traceable to the fraud are to be forfeited including $365,503.26 in funds from 20 bank accounts, eight vehicles, one boat, two boat trailers, two jet skis, and three all-terrain vehicles.

Harold Ray Bettencourt II, 57, lives in Coos Bay, Oregon; Kathy Sue Bettencourt, 54, resides in Myrtle Point, Oregon; Bo Bettencourt, 31, Nicholas Ryan Bettencourt, 29, and Peter Tracy Bettencourt, 25, all reside in North Bend, Oregon. Margo Antonette Densmore, 40, and Joshua Lee Kemp, 37, are from Coos Bay, Oregon.

The indictment alleges that KPI and a predecessor business, Southern Oregon Sterling Parts and Service (SOS), provided nonconforming, defective and counterfeit products to the DoD for the purpose of increasing their profit margin. It alleges that KPI and SOS committed fraud on at least 392 contracts resulting in payments of $7,523,406.59. The indictment alleges that the various nonconforming and counterfeit products where provided to the DoD from KPI through DoD supply centers in Columbus, Ohio; Philadelphia, Pennsylvania; and Richmond, Virginia. Some of the products were critical application items, defined as items essential to weapons systems performance or operation, or the preservation of life or safety of operational personnel. Examples were defective aviation locknuts for the Kiowa helicopter. These locknuts were used on the main rotor assembly of the Kiowa helicopter and were flight critical because the failure of the main rotary assembly could be catastrophic, resulting in death or serious injury to military personnel. Other critical application items included clamp loops used in C-5 military transport plane engines and other aircraft.

The indictment alleges that Harold Bettencourt II facilitated the scheme by directing other defendants to carry out actions on behalf of KPI and its predecessor SOS, such as making false representations in contracts, providing non-conforming and counterfeit products, and providing false documents to the DoD. The indictment includes a number of examples of how the fraud was committed, and explains how some products were counterfeited in Mexico or obtained in China, even though KPI represented them to be from DoD-approved manufacturers in the United States. The DoD-approved manufacturers whose parts were counterfeited or otherwise misrepresented to be genuine include Caterpillar, Inc., BAE Systems Land and Armaments, Freightliner, Pacific Industrial Components, Inc., and SPS Technologies. The indictment also alleges that KPI and its predecessor SOS counterfeited heat treatment certifications of Timber Products Inspection, Inc., on wood packaging materials in order to decrease expenses and increase profits.

The indictment charges all defendants with wire fraud and conspiracy to commit wire fraud. The maximum statutory penalty for wire fraud and conspiracy to commit wire fraud is a 20 year term of imprisonment and a $250,000.00 fine, followed by a three year term of supervised release. It also charges Harold Ray Bettencourt II, Nicholas Ryan Bettencourt and Joshua Lee Kemp with fraud involving aircraft parts. The maximum statutory penalty for fraud involving aircraft parts is a 10 year prison term and $250,000.00 fine, followed by a three year term of supervised release. The indictment also charges Harold Ray Bettencourt II, Kathy Sue Bettencourt, Bo Bettencourt, Nicholas Ryan Bettencourt, Margo Antonette Densmore and KPI with money laundering and conspiracy to commit money laundering. The maximum statutory penalty for money laundering is a 10 year prison term and $250,000.00 fine, followed by a three year term of supervised release.

The matter is scheduled for trial before United States District Judge Michael R. Hogan on June 27, 2012. All defendants were released on conditions pending trial.

Amanda Marshall, United States Attorney for the District of Oregon, emphasized the serious nature of the charges: “The allegation that military personnel were placed in harm’s way for the sole purpose of financial profit warrants vigorous investigation and prosecution.”

A criminal indictment is only an allegation and not evidence of guilt. All defendants are presumed to be innocent unless and until proven guilty.

The case is being investigated by the Department of Defense/Office of Inspector General/Defense Criminal Investigative Service, the Army Criminal Investigative Division Major Procurement Fraud Unit, the Federal Bureau of Investigation, the Internal Revenue Service Criminal Investigation Division, the Social Security Administration/Office of Inspector General, and Immigration and Customs Enforcement. The case is being prosecuted by Assistant U. S. Attorney Sean B. Hoar.
 

Qui Tam Lawsuits and Defense Contractor Fraud Lawsuits

In 1986 as a result of increased government contractor fraud, Congress amended the False Claims Act in order to make it easier for whistleblowers to file claims against fraudulent corporations and individuals.  The act also help protect the Whistleblower or Relator from retaliation.

The 1986 Amendment defines a "claim" as:

"...any request or demand which is made to a contractor, grantee, or other recipient if the United States Government provides any portion of the money or property which is requested or demanded, or if the government will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded."

The whistleblower's share of recovery is a maximum of 30 percent and the government's prior knowledge of fraud now does not necessarily bar a whistleblower from collecting lost revenue. If the government took over the lawsuit, the relator can "continue as a party to the action." The defendant is also required to pay for the relator's attorney fees. The whistleblower is also protected from retaliatory actions by his or her employer. As a result or the amendment, qui tam lawsuits increased dramatically.   Though the amendment was first made fore corrupt defense contractors, the amendment has uncovered billions of dollars in health care fraud.

Anyone who defrauds the government out of revenue can be held accountable under the False Claims Act. Common defendants include defense contractors, health care providers, other government contractors & subcontractors, state and local government agencies,  and private universities. Whistleblowers often include current and former employees of the defrauding company, competitors of government contractors and public interest groups.

The False Claims Act was enacted to encourage private citizens to assist the government in the fight against fraud. Often the whistleblower faces an uphill battle as large, powerful corporations or individuals are usually named as defendants. An experienced attorney in qui tam claims may help you gain a percentage of stolen government funds.