The U.S. Department of Justice on Feb. 8 filed a civil lawsuit against Hanford Site contractor Mission Support Alliance (MSA), accusing it of fraud through false claims and kickbacks from 2010 to 2015. The lawsuit filed in U.S. District Court for Eastern Washington also names Lockheed Martin Services Inc., Lockheed Martin Corp., and Lockheed executive Jorge “Frank” Armijo.
“The defendants fraudulently obtained tens of millions of dollars from DOE through a series of false statements, half-truths, material omissions, corrupt kickbacks and outright lies,” the Department of Justice said in a statement after filing the lawsuit.
Mission Support Alliance holds a 10-year, $3.2-billion award through May to provide support services across the Hanford Site, including information technology.
The lawsuit centers around an award to Lockheed Martin Services Inc. (LMSI) to provide information technology services as a subcontractor to Mission Support Alliance (MSA) while a Lockheed Martin Corp. subsidiary was the primary owner of MSA. Leidos purchased Lockheed’s share of the Hanford contractor in 2016.
The Justice Department alleges the defendants used false statements and omitted critical information regarding anticipated profits for LMSI to obtain the Department of Energy’s consent to the $232 million subcontract award.
The Energy Department repeatedly made clear that LMSI could not earn profit on top of what its owner was already earning as an owner of Mission Support Alliance, according to the lawsuit. But Lockheed Martin Corp. earned profits as an owner of MSA and also claimed profits for LMSI, the Justice Department said. The Department of Energy has previously said MSA improperly awarded $63.5 million in profit to LMSI.
The defendants also are accused of inflating prices to be charged to DOE for work done by LMSI, including using grossly inflated labor rates. Defendants misrepresented the billing rates charged to DOE and the level of effort that would be needed to complete various tasks, the lawsuit alleges. In some cases, the rate charged was set based on more employees than LMSI included in its own budget, the Justice Department said.
“Fraud, corruption and self-dealing at Hanford will simply not be tolerated,” Joseph Harrington, U.S. attorney for the Eastern District of Washington, said in a prepared statement after filing the lawsuit.
Armijo, who was president of MSA between 2010 and 2015 in addition to being a Lockheed executive, and other executives together were paid millions of dollars in cash and stock as part of an incentive program that the Department of Justice alleges amounted to kickbacks. It accuses them of improperly using their positions to provide favorable treatment for Lockheed Martin.
In August, Richard A. Olsen agreed to pay $124,400 to the federal government to settle Justice Department civil allegations that he accepted more than $40,000 in kickbacks from Lockheed Martin Corp. Olsen was a Lockheed Martin employee on loan to Mission Support Alliance as a chief financial officer when he was involved in submitting false and inflated claims to DOE between March 2010 and February 2012, federal prosecutors alleged. He admitted no wrongdoing and agreed to cooperate with the ongoing investigation.
The Department of Justice is seeking triple damages and penalties under the False Claims Act and civil penalties under the Anti-Kickback Act, plus damages for unjust enrichment, breach of contract, and payments LMSI allegedly was not entitled to receive.
Mission Support Alliance, Lockheed Martin Corp., and Armijo strongly denied any wrongdoing in statements released hours after the lawsuit was filed. “Lockheed Martin will defend this matter vigorously,” the company said. Mission Support Alliance said ethical business conduct is one of its hallmarks.
Leidos stressed that the lawsuit pertains to the time before its acquisition of an interest in Mission Support Alliance, which it now operates with Centerra, and that it has worked to establish a new management structure and leadership team. However, Leidos said it has reviewed the allegations and agrees they are completely without merit.
The Energy Department notified the Justice Department and the DOE Office of Inspector General of the possibility of fraud, said Joe Franco, deputy manager for the DOE Richland Operations Office at Hanford. “DOE will not tolerate fraudulent behavior by its contractors and will continue to strengthen its federal oversight at Hanford,” he said.
The department’s Office of Inspector General issued an audit report in April 2016, concluding that several MSA executives also held senior executive positions within Lockheed Martin Corp. and had inappropriately taken actions that resulted in the appearance of a conflict of interest. But it said it did not substantiate the allegation that there was more than an appearance of a conflict of interest.
