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General Dynamics settles fraud lawsuit

01:00 AM EDT on Tuesday, August 19, 2008

By Patricia Hurtado

Bloomberg News

General Dynamics Corp., the parent company of the Electric Boat shipyard in North Kingstown and Groton, Conn., has agreed to pay $4 million to settle a lawsuit claiming a unit, now closed, fraudulently billed the government for aircraft parts that were defective.

U.S. District Court Judge Denis Hurley, in Central Islip, N.Y., approved the settlement yesterday. General Dynamics, based in Falls Church, Va., didn’t admit or deny any wrongdoing, according to court filings.

The government alleged that from September 2001 to August 2003 the division, General Dynamics Armament and Technical Products, defectively manufactured or failed to test parts used in aircraft such as the C-141 transport plane and submarines.

“Fraudulent practices that could compromise the integrity and reliability of equipment used by the men and women of our nation’s armed services is inexcusable,” Brooklyn U.S. Attorney Benton Campbell said in a statement.

The Glen Cove, N.Y.-based unit, which closed in 2004, failed to properly make or test components used in the Los Angeles and Trident Class submarines, the government claimed. The unit billed the Navy for parts while knowing the equipment didn’t meet military specifications, according to the United States.

General Dynamics, the second-largest shipbuilder for the Navy after Northrop Grumman Corp., had bought the unit with its June 2002 acquisition of Advanced Technical Products and added it to its combat-systems business.

The investigation began after former employees at the facility filed a lawsuit under the federal False Claims Act in 2003, according to Campbell’s office.

General Dynamics cooperated fully with the government in its investigation, spokesman Robert Doolittle said.

“The activity that resulted in this lawsuit is alleged to have begun in 2001, pre-dating General Dynamics’ acquisition,” Doolittle said in an e-mailed statement. After the purchase, General Dynamics “began implementing steps to ensure that the company was complying with customer testing procedures and fulfilling customer requirements.”

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