Settlement Delayed In $1.28B MRAP Contract Fraud Suit

Posted April 8th, 2021.

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By Asher Stockler

Law360 (April 8, 2021, 4:21 PM EDT) — The U.S. government and a prominent defense contractor said Wednesday that because of the change in administration, they would need more time to settle a $1.28 billion fraud claim against the contractor related to claims of overbilling.

For the second time, attorneys for the government, Navistar Defense LLC and the whistleblower who brought the suit said that various issues have prevented finalization of a settlement first proposed in November.

“The parties report that progress has been made on a draft settlement agreement and final authorization for the settlement,” they said. “Due to the change of the administration and other circumstances, however, the parties have been unable to finalize the settlement. In accordance with the court’s minute order of February 8, 2021, the parties will provide another status report within in the next 30 days.”

The government has claimed that Navistar lied to the U.S. Marine Corps in 2010 regarding upgrades to Mine-Resistant Ambush Protected vehicles, or MRAPs, that Navistar had sold to the military.

The government intervened in the whistleblower’s False Claims Act suit in December, explaining that it had tasked Navistar with upgrading the MRAPs with independent suspension systems because they were going to be driven on rockier terrain in Afghanistan.

The contracting officer requested pricing data on parts needed to make the suspension systems, which Navistar refused to disclose as protected business information, the government said. But the company was willing to provide sales data on related parts, which could show that its proposed bills to the Marines for the suspension systems were reasonable.

The government said, however, that that a Navistar employee, Michael Cavanaugh, “fabricated” pricing data on these related parts by creating false invoices for sales that never actually occurred.

“Michael Cavanaugh and other Navistar employees knew that the false [invoices] did not reflect actual sales and did not reflect a reasonable price,” the government said. “Navistar’s proposed prices for the 11 [suspension system] parts contained an undisclosed markup well over actual supplier quotes.”

In a subsequent investigation, government officials discovered that one part, for example, was quoted by a supplier for $10,280, but was actually sold to the government for $17,895.

The whistleblower has said that the alleged overcharges amount to $1.28 billion.

None of the parties returned request for comment Thursday.

The whistleblower is represented by H. Vincent McKnight, Kevin Sharp, John McKnight, Andrew Miller and Robert Van Someren Greve of Sanford Heisler Sharp LLP.

The government is represented by Andy J. Mao, Robert J. McAuliffe and Gary Newkirk of the U.S. Department of Justice’s Civil Division.

Navistar is represented by Anne Wylde Robinson, David Rex Hazelton and Sean M. Berkowitz of Latham & Watkins LLP.

The case is Burgess v. Navistar International LLC et al., case number 1:13-cv-01463, in the U.S. District Court for the District of Columbia.

–Editing by Adam LoBelia.

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