Two U.S. Defense contractors, Kilgore Flares Company and the ESM Group, Inc., have agreed to pay a total of $8 million to settle allegations of selling defective counter-measure flares to the U.S. Army in violation of the False Claims Act (FCA). Infrared counter-measure flares are used by the military to divert enemy heat-seeking missiles away from aircraft. Ultra-fine magnesium powder is used in the flares for high-temperature burning that mimics the heat of an aircraft’s engine. Kilgore’s contracts with the U.S. Army prohibited the use of magnesium powder from foreign countries, with the exception of Canada.
The government alleged that ESM knowingly misrepresented the content of magnesium powder imported from China to avoid paying anti-dumping customs duties. Antidumping duties protect against foreign companies dumping products on the U.S. market at prices below cost. The government also alleged Kilgore used the illegally imported Chinese magnesium powder it bought from ESM in the counter-measure flares it sold to the U.S. Army. Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, stated:
The Department of Justice is committed to ensuring that contractors do not cut corners in manufacturing critical items sold to the U.S. military. These settlements also show that the department will aggressively pursue those who avoid paying duties to gain an unfair business advantage over competitors who abide by the rules.
The settlement with ESM resolved a lawsuit filed under the whistleblower provision of the False Claims Act, which allows private parties to sue on behalf of the United States those who falsely obtain federal funds. The whistleblower, Reade Manufacturing Company, received $400,000 as part of the settlement with ESM.
Source: Department of Justice