“You can’t cheat to get a job and then perform. They want you to believe fraud pays.”
By Lee Roop | lroop@al.com
A Huntsville federal court jury verdict Friday could result in a defense contractor having to pay more than $100 million to whistleblowers and the federal government after jurors found the company fraudulently induced the U.S. Army into contracts with Saudi Arabia, El Salvador and Costa Rica.
Attorneys for the defendants declined to comment outside the federal courthouse after the verdict was read. A plaintiffs’ attorney said later that their clients and the U.S. government stand to receive triple the damages awarded by the jury. The jury deliberated for just over an hour before finding MD Helicopters liable in three claims, awarding baseline penalties of nearly $3.8 million in one claim, $29.7 million in the second, and $3.3 million in the third.
The lawsuit from 2013 was originally filed under the False Claims Act by two former employees of MD Helicopters. Under that act the whistleblowers can receive up to 30 percent of the tripled damages, with the rest going to the government, Tony Mastando, attorney with the law firm Mastando & Artrip which represented the whistleblowers. If government prosecutors had pursued the case on its own, which it had declined to do, the whistleblowers would have been eligible for less of a share, he said.
The exact amounts will be determined following negotiations between the whistleblowers and the Department of Justice. U.S. District Court Judge Abdul Kallon, who presided over the case, will have to sign off on it.
The suit against the company was filed in federal district court here by Philip Marsteller and Robert Swisher. They were acting as “relators,” interested parties allowed to sue on behalf of a government agency to reclaim money spent by the government.
“They found in favor of our clients. We’re very proud of them,” plaintiff’s attorney Josh Rush said after the verdict. “Everybody on our side is very happy with the result and thinks the jury got it right.”
The trial and closing arguments offered a look inside the world of defense contracts at Redstone Arsenal in Huntsville. In this case, the Army wanted to buy military helicopters to sell under its Foreign Military Sales program to three American allies: Saudi Arabia, El Salvador and Costa Rica.
The lawsuit alleged that MD Helicopters didn’t follow the Army contract code, and that the company was improperly involved with an army contracting officer in Huntsville who later went to work there. The former officer, Norbert Vergez, served from 2010 to 2012 as the program manager for “Non-Standard Rotary Wing Aircraft” (NSRWA), an Army office at Redstone Arsenal responsible for contracts involving certain “non-standard” helicopters.
Defense attorney Rudy Hill said in closing arguments that there was no performance issue with the helicopters, and the company had saved the Army $100 million on another helicopter deal. It delivered on this contract, too. “This case is about what MD’s state of mind was when it signed those contracts,” Hill said. “It didn’t fraudulently entice the government … there is nothing under the table here.”
Plaintiff’s attorney Josh Russ called the defense case “shocking.”
“We can lie, steal, cheat to get a contract as long as we perform,” Russ said in response. “You can’t cheat to get a job and then perform. They want you to believe fraud pays.”
Updated to clarify that defense attorneys declined comment, and a plaintiff’s attorney explained the potential damages also to clarify that the owner of the company had been dismissed from the lawsuit before the trial began.
