Overbilled Navy by “Renting" Equipment that was Actually Owned by Executives of the Parent Company
A marine maintenance company based in Alabama, and a rental company owned by the marine maintenance company executives, will pay the government more than $2.8 million to settle claims they improperly billed the Navy for rental equipment, announced U.S. Attorney Annette L. Hayes. International Marine and Industrial Applicators, LLC (IMIA) and Marine Equipment Supply, LLC (MES) were involved in maintenance work on the USS Reagan at the Puget Sound Naval Shipyard in Bremerton, Washington.
According to the settlement agreement, between February 2012 and October 2012, IMIA billed the government for equipment rented from MES, through a subcontractor that was used for hull preservation work on the USS Reagan. Under the Federal Acquisition Regulations (FARs), companies like IMIA and MES that are under “common control" are not allowed to bill the government for rental costs, except under limited circumstances that the government contends were not present here. Rather, the FARs treat such equipment as if it were owned directly by IMIA and thus limit compensation to the costs of ownership. IMIA did not disclose its relationship with MES to the Navy while it was presenting invoices for the USS Reagan project, which the government contends resulted in overbillings to the Navy in excess of $1.4 million. The government further contends that IMIA, with MES, knowingly presented such claims for unallowable costs to the Navy in violation of the False Claims Act.
“Government contracting regulations ensure a level playing field and the wise expenditure of taxpayer funds," said U.S. Attorney Annette L. Hayes. “When we learn of evidence that a company has not been operating consistent with those requirements, we will investigate and prosecute as the facts require. I commend the military investigative agencies who put this case together and worked with my office to resolve it."
The settlement agreement calls for the two companies to pay $2,860,948 to the government. Of that amount $1,430.474, or half the payment, represents restitution to the Navy for improperly billed costs. The claims resolved by this agreement are allegations only, and there has been no determination or admission of liability.
The matter was investigated by the Defense Criminal Investigative Service, the Naval Criminal Investigative Service, and the Defense Contract Audit Agency.
The settlement agreement is being handled by Assistant United States Attorney David East.
Source: U.S. Department of Justice, Office of the United States Attorneys
