BOEING PAYS $4.392 MILLION TO RESOLVE FALSE CLAIMS ACT LAWSUIT OVER FRAUDULENT BILLING OF THE U.S. MILITARY ON CHINOOK HELICOPTER PROGRAM

Philadelphia, Friday, January 20, 2012: United States Attorney for the Eastern District of Pennsylvania Zane David Memeger and the United States Department of Justice announced today that The Boeing Company, the largest manufacturer of commercial jets and military aircraft combined, has agreed to pay $4,392,779.74 to settle a Federal False Claims Act whistleblower lawsuit brought by current Boeing employee Vincent A. DiMezza, Jr.

DiMezza, a former United States Marine, has worked for Boeing since 2007, currently serving as a Production Manager in the Chinook Helicopter Program at Boeing’s plant in Ridley Park, Pennsylvania. The United States Department of Justice joins Mr. DiMezza, who filed his whistleblower lawsuit in federal court in 2010, in alleging that Boeing has engaged in a pattern and practice of submitting false and fraudulent claims for modification work performed under a government contract with the United States Department of Defense to produce, maintain, repair and/or modify the Chinook CH-47D and MH-47 helicopters.

The U.S. Military Chinook Helicopter Program

The Chinook Helicopter is a multi-mission, heavy-lift transport helicopter. Its primary mission is to move troops, artillery, ammunition, fuel, water, barrier materials, supplies and equipment on the battlefield. Its secondary missions include medical evacuation, disaster relief, search and rescue, aircraft recovery, fire fighting, parachute drops, heavy construction and civil development.

Chinook Helicopters were introduced in 1962 as the CH-47 Chinook, and models A, B, C were deployed in Vietnam. A central element in the Gulf War, the Chinook continues to be the standard for the United States Army in the global campaign against terrorism. Since its introduction approximately 1,179 Chinook helicopters have been built.

Boeing’s Contract to Modernize U.S. Military Chinook Helicopters

Beginning in 2003, the United States Department of Defense awarded Boeing contracts to produce and modify Chinook helicopters as part of the U.S. Army’s effort to modernize its fleet of heavy lift helicopters. These contracts are identified by the Department of Defense as contracts numbers W58RG2 04 G 0023 and W58RGZ 08 C 0098. Over one hundred new Chinooks were ordered, and Boeing also agreed to “remanufacture” several hundred older Chinook helicopters by overhauling their airframes and performing extensive modifications to the avionics and engines.

Boeing’s manufacturing facility in Ridley Park, Pennsylvania and a Boeing facility in Millville, New Jersey are the principle sites where work is performed on the Chinook Modification Program.

Boeing’s Compensation for Modernization of U.S. Military Chinook Helicopters

Boeing’s contracts with the United States Department of Defense provide for Boeing to be compensated in two independent but related ways. First, Boeing receives a fixed price for work that must be completed on every airframe in order to upgrade it. Because this is the standard work required by the contract, this work is referred to as “Basic” work. Second, where there is pre-existing damage or wear to an airframe, Boeing is paid on an hourly basis to fix this damage or wear to an airframe. Such airframe specific work is referred to as “Over and Above” work. The majority of the time, Over and Above work is billed to the government based on an estimate of how long a given repair will take to complete. This estimate is agreed upon by the United States and Boeing. Approximately one third of the time, however, in cases in which the United States and Boeing cannot agree on an estimate before the work is complete, the Over and Above work is billed to the United States based on the time that Boeing’s employees reported actually spending on that job.

Boeing tracks the work of its mechanics and allocates their time to the bills submitted to the United States by way of a computer system. Each individual job to be completed as a part of either the Basic or Over and Above work is given an identifying number. When beginning a job, a mechanic swipes his or her unique badge at a scanner and identifies on the system the job that he or she will be doing, a process known as “badging in.” At the conclusion of work on that job, the mechanic either “badges out” of that job, i.e. swipes his or her unique badge and indicates that the job or his or her work on the job is complete, or he or she badges in to another job, which automatically stops the clock running on the first job and starts a clock running on the new job.

Boeing’s Fraudulent Billing of Work on U.S. Military Chinook Helicopters

Mr. DiMezza’s whistleblower lawsuit alleged that since at least 2003, Boeing has engaged in a scheme to fraudulently bill the Department of Defense for inflated hours of work on Chinook Helicopters. In particular, the United States and Mr. DiMezza alleged that, between 2005 and the present:

1. Multiple Boeing mechanics performed Basic work while they were badged in to Over and Above jobs.

2. Multiple Boeing first-line managers instructed Boeing mechanics to badge in to Over and Above jobs while they were actually performing work on Basic jobs. This allowed these managers to improve their mechanics’ apparent efficiency at performing Basic jobs, which Boeing carefully tracked and made part of their annual performance appraisal, at the expense of their mechanics’ efficiency at performing Over and Above jobs, which Boeing did not monitor in like fashion.

3. Some Boeing mechanics who completed their work on Over and Above jobs in less than the job’s estimated time began performing Basic work while still badged in to the Over and Above job, until the Over and Above job reached its estimated time.

4. At a meeting in approximately late 2005, a Boeing first-level manager instructed a number of senior mechanics at Boeing that they could remain badged in on Over and Above jobs while performing Basic work for up to four to five times the estimated hours for the Over and Above work.

5. As a result of the foregoing mis-billing, the United States paid Boeing extra for work that was already included in Boeing’s contract payment.

Details of the Settlement

Boeing has agreed to pay the United States $4,392,774.74 to settle the False Claims Act allegations raised by Mr. DiMezza, which were joined by the United States. In addition, Boeing further agrees as part of the Settlement to undertake significant changes at its Ridley Park, Pennsylvania plant designed to prevent similar overbilling to the Department of Defense in the future. Those remedial measures include: modifications to Boeing’s manufacturing systems to prevent overbilling Over and Above work; implementation of measures to review the efficiency of Over and Above works; and additional compliance training for employees.

Pursuant to the Federal False Claims Act, Mr. DiMezza is entitled to receive 15% to 25% of the United States’ recovery for reporting Boeing’s fraudulent overbilling scheme to the United States. In addition, the False Claims Act requires Boeing to pay Mr. DiMezza’s reasonable attorneys’ fees and costs expended in the prosecution of this case. The Court has scheduled a hearing on the settlement agreement for February 27, 2012.

Mr. DiMezza is represented by Marc S. Raspanti, Michael A. Morse, and Christopher A. Iacono, of the national whistleblower law firm of Pietragallo Gordon Alfano Bosick & Raspanti, LLP. Michael Morse, a former prosecutor and current chair of the law firm’s national whistleblower practice, applauded the courage and tenacity of Mr. DiMezza. “Mr. DiMezza has exhibited tremendous courage in blowing-the-whistle on the substantial overbilling by Boeing on the Chinook Helicopter Program. As a former United States Marine, Mr. DiMezza was especially disturbed that this overbilling repeatedly occurred on military aircraft of such importance to our men and women in uniform around the world. Mr. DiMezza, and the members of our firm’s whistleblower practice group, spent hundreds of hours working to expose this complex billing scheme and supporting all aspects of the government’s investigation. Today’s settlement would not have been possible without Mr. DiMezza’s courage and his refusal to simply look the other way.” United States Attorney Zane David Memeger likewise complimented Mr. DiMezza for coming forward in this case.

Marc Raspanti, the founder of the law firm’s whistleblower practice, applauded the work of the federal prosecutors who spearheaded the government’s enforcement efforts in this complex case: Assistant United States Attorneys Paul Kaufman and Gregory David. Mr. Raspanti also applauded the efforts of the investigators from the Defense Criminal Investigative Service who contributed significantly to the investigation of Mr. DiMezza’s complex whistleblower case. “The close partnership between Mr. DiMezza, his attorneys, and the tenacious federal prosecutors and investigators was essential to the successful recovery reached in this complex case. This is precisely the type of private-government partnership envisioned by the False Claims Act when it was substantially amended in 1986.”

The Federal False Claims Act

The False Claims Act allows private persons (known as “relators”) to file a lawsuit against those business and individuals that have directly or indirectly defrauded the federal government. The False Claims Act was enacted by Congress at the request of President Lincoln, who signed it into law on March 2, 1863. The Act was strengthened in 1986, and again with amendments enacted in 2009 and 2010. The Act is the government’s primary tool against fraud by its contractors, as evidenced by the recovery of more than $28 billion since 1986.

Pietragallo Gordon Alfano Bosick & Raspanti, LLP, is one of the largest and most successful whistleblower law firms in the United States. Lawyers in the nationwide whistleblower practice group of Pietragallo Gordon Alfano Bosick & Raspanti have served as lead or co-lead counsel in numerous whistleblower cases that have recovered more than $1 billion for federal and state taxpayers. For more information on the Federal False Claims Act, State False Claims Acts, SEC Whistleblower Program, the IRS Whistleblower Reward Program, or the nationwide whistleblower practice of Pietragallo Gordon Alfano Bosick & Raspanti, visit www.falseclaimsact.com, www.pietragallo.com, www.fraudwhistleblowersblog.com, or call (215) 320-6200.