Settlement Reached in False Claims Act Lawsuit Against Military Defense Contractor

ATK Launch Systems Inc. (“ATK”) has agreed to a settlement worth nearly $39 million to resolve False Claims Act allegations that the defense contractor sold defective and dangerous illumination flares to the United States Army and Air Force.  Pursuant to the settlement agreement, ATK will provide roughly $16 million worth of services to repair 76,000 existing para-flares still used or available for use by the government in addition to $21 million in cash payments.

The fraudulent activity was first brought to light by an ATK employee  who filed the lawsuit under the qui tam provisions of the False Claims Act which enable and encourage private citizens, referred to as Relators under the law, to bring suit on behalf of the government when aware of the existence of a scheme of false claims and fraud perpetrated against the government.   In order to meet government specifications, the flares were required to withstand a 10-foot drop test without exploding or ingnighting, a condition of sale that the Flares manufactured by ATK failed to meet.  The whistleblower reported concerns to supervisors in 2005 after becoming personally aware of the defect. In response, however, the company refused to fully disclose to the government the extent of knowledge and awareness the company had since 2000 when it is alleged ATK first discovered the defects.

Whistleblower actions under the False Claims Act are particularly important in defense contracting cases, given the vital importance of maintaining the integrity of equipment and goods sold to the military. Indeed, in a statement issued by the Department of Justice on Monday, the government noted that nighttime flares are routinely used by the military for “combat, covert and search and rescue operations” including  ”extensive[] [use] by American forces in Iraq and Afghanistan in the global war on terror.”  In addition to promoting the safety and effectiveness of goods sold to the government, the False Claims Act promotes the prudent and efficient expenditure of taxpayer dollars on government contracts, which federal data indicates account for hundreds of billions of dollars in government spending each year.