Navistar to pay $50 million to settle complaint accusing it of fraudulent pricing

Posted May 27th, 2021.

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By Jen Judson

WASHINGTON — Navistar Defense has agreed to pay the U.S. government $50 million to settle a complaint filed by a former Navistar Defense employee accusing the company of fraudulent, inflated pricing for the thousands of mine-resistant, ambush-protected vehicles it sold to the U.S. Marine Corps from 2007 to 2012, according to a statement from the whistleblower’s legal team.

The U.S. District Court for the District of Columbia unsealed a 6-year-old complaint in December 2019 filed by Duquoin Burgess, a former contract director at Navistar. The complaint claimed the company violated the False Claims Act by forging invoices, catalog prices and other information used in negotiations to sell MRAP vehicles to the Marines.

Burgess sought at least $1.28 billion in damages, which roughly equates to the amount of money the former employee believed the company reaped from lying about its prices to the government.

The complaint, filed in 2013, was required to remain sealed until the U.S. government completed its investigation into the claims.

Burgess, who asked for a jury trial, was represented by the law firm Sanford Heisler Sharp. Burgess is set to receive $11.6 million of the settlement funds, according to the settlement agreement reviewed by Defense News.

His attorney Vince McKnight told Defense News in 2019 that the case is unusual because even the company’s top executives, including its president, allegedly knew about the fraudulent activity.

“This settlement delivers a strong message that the Government requires contractors to be truthful and honest in contract negotiations,” McKnight said in the May 27 statement. “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 alleged forged and fraudulent pricing records were used to secure both the initial contract award and further orders from 2007 to 2012, according to the complaint filed by Burgess’ attorneys.

The company allegedly either forged sales history where there was no sales history or it nearly doubled commercial prices for a variety of critical MRAP parts like the chassis, the engine and the suspension system.

The complaint claims the company took advantage of the very critical need to rapidly procure MRAPs to protect soldiers against improvised explosive devices in Iraq and Afghanistan by inflating its prices for the vehicles.

Over the course of the MRAP contract’s five-year life cycle, the government paid Navistar approximately $9 billion for its MaxxPro MRAPs, according to the complaint, but a conservative estimate alleges that roughly $1.28 billion of that was based on fraud. According to the complaint, the government could be entitled to up to three times the actual damages suffered if the judge finds the Navistar guilty of fraudulent conduct — a total of $3.84 billion.

According to the settlement agreement, “Navistar expressly denies the allegations” brought forward in the civil action and complaint and the agreement “is not an admission of any wrongdoing or liability by Navistar.”

Likewise, the agreement “is not a concession” by the U.S. government or Burgess that “claims are not well founded,” the document noted.

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