The U.S. Department of Justice said this week a federal court in Washington state should reject a motion to dismiss a fraud lawsuit brought filed against a contractor and subcontractor at the Energy Department’s Hanford Site.
In an 86-page document filed Monday in U.S. District Court for the Eastern District of Washington, the Justice Department said defendants Mission Support Alliance (MSA), Lockheed Martin Corp., Lockheed Martin Systems Inc. (LMSI), and executive Frank Armijo have not properly addressed the underlying allegations.
The defendants filed their motion to dismiss in April.
“In their motions to dismiss, defendants do not even attempt to dispute that the United States’ allegations set forth the essential elements of the False Claims Act, Anti-Kickback Act” case filed in February, the Justice Department said.
Mission Support Alliance provides site-wide services, including information technology and integrated infrastructure services, at the Hanford Site. Leidos bought Lockheed’s share of the Hanford contractor in 2016, after the alleged fraud detailed in the Justice Department lawsuit.
The case centers around an award to Lockheed Martin Services Inc. (LMSI) to provide information technology as a subcontractor to Mission Support Alliance while a Lockheed Martin Corp. subsidiary was also the Hanford contractor’s primary owner.
Armijo was president of MSA between 2010 and 2015, in addition to being a Lockheed executive. He and other executives together were paid millions of dollars in cash and stock as part of an incentive program that the Department of Justice says was tantamount to kickbacks for the fraud scheme.
The Justice Department says the federal government was essentially double-billed between 2010 and 2015 for information technology services provided by LMSI as a subcontractor to Mission Support Alliance. The value of the subcontract was $275 million, according to the recent Justice Department filing.
The Energy Department was overcharged to the tune of $63 million, according to Justice.
Lockheed Martin collected double profits for information technology services — once as the principal owner of MSA and also as the owner of LMSI, according to the Justice Department.
Put simply, the defendants “lied repeatedly” to get the Energy Department’s consent for Mission Support Alliance’s subcontract to LMSI, Assistant U.S. Attorney Daniel Fruchter wrote. This includes lies about anticipated profit for the two Lockheed Martin entities under the subcontract, the level of effort to fulfill the agreement, the labor rates charged by LMSI, and other issues.
“Defendants engaged in a further scheme in which [the subcontractors] LMC and LMSI paid MSA officials, including Frank Armijo, MSA’s president, millions of dollars in kickbacks to reward them for securing favorable treatment,” according to Fruchter.
The companies strongly denied the Justice Department allegations when the lawsuit was filed in February , and they refuted specific claims in an April filing of the motion to dismiss.
Mission Support Alliance brought the dispute over LMSI payments to the U.S. Civilian Board of Contract Appeals, which had not ruled when the Department of Justice filed its suit. The case before the contract appeals board is now stayed.
Mission Support Alliance said in April the Justice Department case is an example of “overreach” in a years-old contract dispute.
A motions hearing is set for Oct. 3 in U.S. District Court for Eastern Washington. Mission Support Alliance has not yet reviewed the filing, a company spokesperson said Friday.
