On March 17, the Justice Department announced that four defendants, including two affiliated manufacturing companies and their chief executive, agreed to pay $10.5 million to settle allegations that they overcharged the US Air Force and US Navy for welding equipment supplied under federal contracts, a relatively modest settlement compared to larger False Claims Act cases involving large defense contractors.
Prosecutors alleged the overcharges were related to equipment supplied as part of a federally-backed effort to refurbish and equip a large-scale welding facility in South Carolina.
W International LLC and Precision Metal Equipment Handling LLC, each based in Michigan; South Carolina-based W International SC LLC; and Edward Walker, chief executive of W International LLC and W International SC LLC, were accused of deliberately making inflated claims for welding tables used in military applications. The settlement resolves allegations brought under the False Claims Act; the defendants do not admit liability.
Attempts by ENR to seek comment from the accused contractors were unsuccessful.
The companies were engaged in industrial welding and metal fabrication, with Precision Metal Equipment Handling manufacturing welding tables supplied to W International SC, according to the Justice Department.
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In fabrication shops, welding tables are basic fixtures used to position, hold and align steel components during welding and assembly, making them basic but essential production equipment in heavy manufacturing environments.
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Federal officials said contractors are only required to bill for costs allowed under defense agreements. “Contractors and subcontractors are expected to charge no more than authorized by their contracts with the military,” Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division said in a statement.
Funding for this work was provided through the Defense Production Act under a US Air Force Technology Investment Agreement, as well as through supplier development funds connected to a Navy submarine construction contract with General Dynamics Electric Boat, which is leading the construction of the Navy’s Columbia- and Virginia-class submarines, according to the Justice Department.
The case comes as the Navy continues efforts to expand its industrial base to support shipbuilding programs, including initiatives to strengthen supplier capability, modernize production processes and address labor shortages in the fabrication and manufacturing trades.
A recent report by the US Government Accountability Office found that the Navy’s shipbuilding programs face persistent supplier delays, labor shortages and infrastructure constraints, and that none of the seven shipbuilders it reviewed was positioned to meet delivery targets under current conditions as the Navy seeks to accelerate submarine delivery schedules.
Naval Criminal Investigative Service officials said fraud involving the procurement of critical materials can undermine those efforts.
“Contractors who overcharge betray the public’s trust and undermine this critical mission,” said Greg Gross, special agent in charge of the agency’s economic crimes field office.
The settlement stems from a whistleblower lawsuit filed under the False Claims Act, which allows individuals to file claims on behalf of the federal government. The whistleblower, identified as a former employee of W International SC, will receive approximately $1.86 million as part of the settlement.
The case was handled by the Department of Justice’s Civil Division, the United States Attorney’s Office for the District of South Carolina, the Naval Criminal Investigative Service, the Defense Criminal Investigative Service, and the Defense Contract Audit Agency.
The lawsuit, filed in the U.S. District Court for the District of South Carolina, remains only a settlement based on allegations; the defendants did not admit any liability.
