Derco Aerospace subsidiary of Sikorsky hit with whistleblower suit alleging misbilling

A former financial analyst and assistant controller for Derco Aerospace has filed a whistleblower suit under The False Claima Act alleging that Derco and others used special software to overbill the U.S. Department of Defense by nearly $50 million for aicraft parts. Derco is a subsidiary of Sikorsky Aircraft Corp., based in Stratford, Conn.

The complaint alleges that Derco and its parent and sister companies, Sikorsky Aircraft and Sikorsky Support Services Inc., respectively, submitted false bills to the Department of Defense with an impermissible 20% markup on parts the companies had purchased from other vendors. According to the complaint, special software hid the markup to make it difficult to detect, as the price billed to the government appeared to be the actual purchase price of the spare parts, but was instead the price plus the markup.

The attorney, Nola Hitchcock Cross, said the government is entitled to triple damages plus penalties of $5,500 to $11,000 for each request for payment. Altogether, it could add up to $150 million.”This is potentially the largest whistle-blower suit ever filed in Wisconsin under the False Claims Act,” Hitchcock Cross said.

As the “relator” in the lawsuit, Patzer may be entitled to between 15% and 25% of any money recovered. If the Government collects $150 million and if she were to get 20%, that would mean a reward of $30 million.

The original complaint was filed in 2011 but remained secret until it was unsealed this week by U.S. District Judge Rudolph Randa.

The complaint alleges that Derco and its parent and sister companies, Sikorsky Aircraft and Sikorsky Support Services Inc., respectively, submitted false bills to the Department of Defense with an impermissible 20% markup on parts the companies had purchased from other vendors. According to the complaint, special software hid the markup to make it difficult to detect, as the price billed to the government appeared to be the actual purchase price of the spare parts, but was instead the price plus the markup.

The markups, on parts for military training aircraft supplied to the U.S. Navy, totaled nearly $50 million, according to Hitchcock Cross.

Patzer was hired by Derco in 2002 as a financial analyst. In 2003, she became assistant controller for financial reporting and Sarbanes-Oxley compliance. By 2009, she was the point of contact for the company’s defense contract audits, according to the complaint.

The U.S. Department of Justice said it would file its own complaint within 60 days, according to the online publication Law 360. It only intervenes in whole or in part in about 26% of False Claims Act cases, Cross said.

Sikorsky Aircraft designs, manufactures and services aircraft including military helicopters. Sikorsky and Derco are part of United Technologies Corp., also named in the lawsuit, which has more than 212,000 employees and had $63 billion in revenue last year.

United Technologies, based in Hartford, Conn., provides high-technology products and support services to the aerospace and building systems industries.