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Fraudulent Overcharging for Parts of Military Vehicles at Center of 8 Year Case
WASHINGTON, DC, May 27, 2021 – On May 27, 2021, Navistar Defense and Navistar International (“Navistar”) agreed to pay the United States $50 million to resolve claims that the company systematically overcharged the military for Mine Resistant, Ambush-Protected (“MRAP”) vehicles from January 2007 to January 2012.
The settlement resolves U.S. ex rel. Duquoin Burgess v. Navistar, Case No. 13-cv-1463 (D.DC), a 2013 qui tam complaint filed by Duquoin Burgess, on behalf of himself and the United States. Duquoin Burgess, the relator is represented by H. Vincent McKnight, Jr., Managing Partner of Sanford Heisler Sharp's Washington, DC Office and co-chair of the firm’s whistleblower practice, former U.S. District Chief Judge for the Middle District of Tennessee Kevin Sharp, Managing Partner of Sanford Heisler Sharp's Nashville Office, DC-based Partners John McKnight and Andrew Miller, and DC-based associate Rob Van Someren Greve.
According to the complaint, Navistar violated the False Claims Act by defrauding the Government in its contract to produce the MRAP vehicles. During contract negotiations with the Government, Navistar allegedly presented forged invoices and other false and highly misleading documents to secure the multi-billion dollar MRAP contract.
“Mr. Burgess showed enormous courage in bringing this fraud to the attention of the Government,” Vincent McKnight said. “This settlement reinforces the vital role that whistleblowers play in uncovering fraud.”
Navistar allegedly doctored invoices to reflect inflated prices for MRAP vehicle components—including the vehicles’ chassis, engines, and suspension systems—in the commercial market. According to the Complaint, many of the products in the fraudulent documents had no commercial sales history. Others allegedly had true “commercial” prices amounting to as little as half the price that Navistar charged the Government.
The Complaint states that Navistar then certified that the prices were “accurate, complete, and current” on all but one of the orders. Mr. Burgess, a former Contract Director at Navistar, witnessed the fraudulent conduct first-hand.
The case revolves around the complex federal procurement regulations on Cost Accounting Standards. The Federal Government procurement bidding system requires honesty, both contractually and in fact, to ensure that the Government—and ultimately, the taxpayers—are protected from less scrupulous vendors. The Government does not operate on the same terms as commercial vendors, because it often has mission critical deadlines that put hard limits on the time it can take to verify every element of every bid.
The regulations therefore streamline the bidding system to allow the Government to procure products at a fair price. The Government expects contractors to be truthful about their sales history, so it can simply apply a series of factors to bids to identify the best value. Because the vast majority of bids from most companies are truthful, this system helps the United States purchase and deliver critical resources more quickly and at a reasonable cost.
However, the Complaint alleges that Navistar took advantage of this system and of the Government’s need for MRAP vehicles in Iraq and Afghanistan to engage in a pervasive and long-running scheme to charge the Government wildly inflated prices.
The United States Department of Justice partially intervened in the case in 2019, alleging it was overcharged on specific parts of the MRAP’s independent suspensions system. Navistar will pay $50 million to resolve the both the intervened and the non-intervened portions of the case.. Navistar also agreed to provide the Government, upon request, with all nonprivileged documents related to the allegations in the complaint.
“This settlement delivers a strong message that the Government requires contractors to be truthful and honest in contract negotiations,” said John McKnight, Co-Chair of Sanford Heisler Sharp's Whistleblower and Qui Tam Practice Group. “Not only was there a significant monetary settlement, but the Government introduced a novel and exciting settlement term requiring it to have unfettered access to unprivileged company documents related to the allegations.”
The United States is represented by Darrell Valdez, Assistant United States Attorney for the District of Columbia, and Gary Newkirk, Department of Justice Trial Attorney.
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