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Shipyard Repays $9.2M to US Government to Settle Overbilling

The island structure of the aircraft carrier Ronald Reagan (CVN 76) is lifted into place at Newport News Shipbuilding. (Photo: U.S. Navy, courtesy of Newport News Shipbuilding.)
The island structure of the aircraft carrier Ronald Reagan (CVN 76) is lifted into place at Newport News Shipbuilding. (Photo: U.S. Navy, courtesy of Newport News Shipbuilding.)

JACKSON, Miss. — One of the nation's largest military shipyards is paying $9.2 million back to the federal government after a former employee alleged the Mississippi shipbuilder falsified records to maximize contracting bonuses.

The U.S. Justice Department announced the settlement Tuesday with Huntington Ingalls Industries. The Newport News, Virginia, company operates the 11,000-employee Ingalls Shipbuilding in Pascagoula. Spokeswoman Beci Brenton said Huntington Ingalls cooperated with the government and has strengthened compliance efforts.

The settlement resolves allegations that Huntington Ingalls charged labor costs to contracts for which work wasn't actually done, and charged the government as if supervisors had dived to work on ship hulls, or even for dives that never happened. The company charged the U.S. Navy and Coast Guard on various ships it was building.

"Corruption, fraud and bribery are not victimless crimes," Mike Wiest, special agent in charge of the Naval Criminal Investigative Service Southeast Field Office, said in a statement. "Overcharging for work not done is not only criminal on its face, investigating those crimes siphoned resources and time which would have been better invested in protecting the nation."

The allegations were originally brought on behalf of the government by a former Huntington Ingalls employee named Byron Faulkner. Under the federal False Claims Act, which allows a private individual to bring suit on behalf of the government, he'll get $1.6 million of the settlement.

Faulkner, a Vancleave resident, said in his lawsuit that he started work in at Ingalls in 1998 and became a foreman in 2012. Faulkner's lawsuit states he discovered that supervisors were falsifying records to assign work-hours to ships others than the ones employees were actually building. If Ingalls completed work in less than a specified number of man-hours, it would get incentive payments from the Navy and Coast Guard, and supervisors would share in those bonuses.

Federal prosecutors say problems ran at least from 2003 to 2015.

"Ingalls throughout all such years organized and allocated its supervisory and other personnel based on Ingalls's corporate purpose of receiving the maximum dollars in periodic incentive payments," Faulkner's 2013 lawsuit states.

The lawsuit claims Ingalls fired 20 supervisors over the practice in 2013. At least three of those have been convicted of federal crimes. Neil Holden and Robert Gardner pleaded guilty to failing to report a felony in 2015, agreeing they had pressured subordinates to falsify hours. Holden was sentenced to three years of probation, eight months of home confinement and a $17,500 fine. Gardner was sentenced to 6 months in prison, 6 months home confinement and a $20,000 fine.

Randy Wilson was sentenced to two years' probation and a $4,000.00 fine for making false statements.

Huntington Ingalls admitted some mischarges already in 2012, 2013 and 2015, acknowledging it had billed the Navy and Coast Guard for dives that did not occur, as well as upcharging for supervisors diving when supervisors did not. The company already paid back $400,000 related to dives and $1.3 million for other allegations.

The settlement also says the Navy held back $4.7 million and Coast Guard held back $3.6 million in payments.

--This article was written by Jeff Amy from The Associated Press and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

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