A federal judge unsealed a 6-year-old whistleblower suit against Navistar Defense LLC and Navistar International Corp. (NYSE: NAV) that seeks at least $1.28 billion in damages over allegedly forged invoices for military vehicles and components.
According to the civil suit unsealed Dec. 3, Navistar violated the False Claims Act by forging invoices, catalog prices and other data during negotiations of a multibillion-dollar contract for mine-resistant, ambush-protected (MRAP) vehicles and related components from 2006 to 2013.
In August 2017, the U.S. Department of Justice accused Navistar Defense of making false and misleading statements during price negotiations and a resulting audit. The Justice Department claimed Navistar Defense overcharged by $88 million for independent suspension systems in 2009 and 2010. It sought treble damages and penalties totaling $264 million.
Navistar Defense has been in discussions with the Department of Defense Inspector General and Justice Department since subpoenas were first issued in the third quarter of 2016. The government is continuing to question Navistar employees, according to Navistar's third-quarter 10-Q filing with the U.S. Securities and Exchange Commission.
"We believe our pricing was fair, reasonable and competitive," Navistar spokeswoman Lyndi McMillan said. "The company intends to defend itself as necessary and appropriate."
Navistar, which sold 70% of Navistar Defense to Cerberus Capital Management in December 2018, has been in mediation with the government over the allegations since February 2019.
The case, U.S. ex. Rel Duquoin Burgess v. Navistar, was filed in 2013 by Duquoin Burgess, a former contract director at Navistar. An employee with evidence of fraud against federal programs or contracts can sue the wrongdoer on behalf of the U.S. government. In so-called qui tam actions, the government can intervene and join the action.
"We are disappointed the government has chosen to intervene in this matter," McMillan said.
According to the complaint, the government overpaid approximately $1.125 billion for approximately 9,000 MRAP vehicles with the Navistar 7400 chassis; $36.4 million for 2,697 MRAP vehicles with a MaxxForce D9.316 engine and $118.7 million for 3,898 independent suspension kits.
The suit claims fabricated and fraudulent representations underlie both the initial contract award and subsequent placement of delivery orders from 2007 to 2012. Navistar allegedly used forgeries to skip the requirement that it present real evidence of past sales, according to the complaint. Navistar Defense took advantage of the military's need for MRAP vehicles in Afghanistan, according to the suit, which seeks treble damages, the maximum allowable payment to Burgess under whistleblower rules and a jury trial.
"There is nothing more important than the safety of those serving our country, and we take tremendous pride in the vehicles we manufacture," Navistar's McMillan said. "We value our long-standing partnership with the military and are proud to provide safe, reliable military vehicles of superior quality."
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