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Business

Boeing Pays $23 Million To Settle Claims It Overbilled Government

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Christopher Ebdon http://bit.ly/1w1LFDq
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Court documents unsealed Friday show Boeing Corporation paid $23 million to settle a lawsuit with the department of justice over allegations that for years it overbilled the government on aircraft maintenance at Kelly Airfield location here in San Antonio.

Boeing is an enormous company, lots of employees, lots of planes. Friday morning’s settlement dealt with improperly charging and overbilling the Air Force for maintaining an enormous plane, the C-17. 

“It’s a semi-truck in the air,” says Clinton Craddock, a former C-17 mechanic and then Estimator at Boeing.

"It can carry a battle tank, a 60 ton M-1 battle tank. It carries helicopters. Back in 1997, when the 'Free Willy' [movie came out]--about that killer whale; it was transported in the belly of a C-17,” Craddock continues.

Craddock worked at the San Antonio Boeing for 13 years. He started seeing issues with how the government was billed for maintenance of the big vehicle almost immediately in 1998. 

"You know I was fresh off the airplane and it's like 'You guys, It don't take you this long to do this. What are you charging to?' ”

According to court documents, Craddock and three others, Fred Van Shoubrouek, Anthony Rico and Fernando de La Garza, allege that Boeing was intentionally billing the U.S. Government for things outside the scope of their contracts from 2003-2007. 

For instance, weekly meetings that all team members were required to attend on process improvement were being billed to the government as direct work on C-17s. Craddock says many things were improperly billed, and that he told his bosses immediately. 

"I sent an email to my director and said these people are off on this task, but they are charging direct, shouldn't we notify the government that they are paying for this activity and the response was absolutely not," says Craddock.

Additionally, he and other whistleblowers alleged in court documents Boeing was gaming their contracts by billing the government for work done on projects that had already been completed, or shifting costs to other jobs or other parts of contracts. 

Craddock’s attorney Glenn Grossenbacher explains, “There were a number of ways in which the labor was mischarged. For instance--let’s say under a fixed charge contract, you were doing work on something and you weren’t going to get paid anymore because you had already hit the total price of the contract. Well what you do is charge as time and materials under a different package. So you can do a lot of cost shifting back and forth.”

Craddock came forward in 2007 and sued under the False Claims Act.  According to him this came only after years of emails and meetings with directors trying to raise the issue and being rebuffed. He talks about going to Boeing’s internal ethics board and again being turned away.

He describes some limited success after persisting with the ethics office in 2007, but claims the government was never recouped any of the money. Also he thinks it put him on the bad side of a lot of managers at Boeing. He left the company in 2011.

"Government contractors who seek illegal profit at the expense of taxpayers will face serious consequences." - Brenda Joyce, Acting Assistant Attorney General

In a statement to TPR, Boeing acknowledged overbilling the government in a variety of ways on the C-17 program here in San Antonio, but they claim it wasn’t intentional. Rather it was the result of “inadequate charging discipline.” Further the statement says that Boeing discovered the billing in 2006 and notified the U.S. Government. Boeing claims this case actually is the result of their own investigation and that new billing practices were immediately implemented.

This was the first time that the attorney for the whistleblowers, Glenn Grossenbacher, had heard the claim that Boeing made the Government aware of the overbilling in 2006. He was surprised to hear it, and assuming Boeing is being honest he questions why the Department of Justice would pursue a Qui Tam case against the company. 

Qui Tam cases entitle whistleblowers to some of the settlement; in this case, the four current and former Boeing employees will split almost $4 million from the settlement. 

Boeing declined to provide documentation of any 2006 disclosure. When pressed for clarification they referred TPR to the Department of Justice, but did change the year of their notification to March of 2007.

The Department of Justice officials TPR discussed the case with had no information on any disclosure of billing irregularities from Boeing in 2006, and provided none at the time this report aired. Additionally there is no mention of Boeing’s internal investigation or in the public statements that DOJ has made. 

In their press release on this settlement, Acting Assistant Attorney General Joyce R. Branda did say,  “Government contractors who seek illegal profit at the expense of taxpayers will face serious consequences.”