U.S. sues Boeing for fraud in connection with B-1 bomber
October 1, 2008
The U.S. Department of Justice has filed a civil fraud suit against The Boeing Company for alleged price gouging. Boeing is accused of unlawfully jacking up the price for a missile decoy system designed for the Air Force's B-1 bomber by a substantial amount. During price negotiations, Boeing assured the government that it would build in-house the component parts necessary for the decoy system, which would cost more than if the parts were outsourced. But after the Air Force agreed to pay Boeing the higher price for building all the parts, Boeing turned around and outsourced the component parts at a discount to the company, thus defrauding the government of the cost difference for the outsourced parts. The Air Force learned of the fraud from whistle-blowers inside Boeing, who complained to their managers that the company was overcharging. The managers allegedly ignored the complaints and hid the overcharges from the Air Force. Although Boeing denies the charges, Air Force investigators and auditors claim to have evidence of 140 incidents of over billing by Boeing. Under the False Claims Act, the government may recover up to three times the amount of the loss and enforce criminal penalties for each of the 140 incidents of fraud.