U.S. Will Join in Fraud Suit Against McDonnell Over C-17

The Justice Department filed notice Thursday that it will join in prosecuting a fraud suit against McDonnell Douglas Corp., charging that the firm improperly billed the government for massive repair costs for defective assembly tools on the C-17 cargo jet.

The suit was filed under the federal False Claims Act in 1990, but its existence was kept under seal during a six-year federal investigation into the tooling problems at McDonnell’s C-17 assembly plant in Long Beach.

A McDonnell spokesman said the company will vigorously defend itself against the suit and that the claim is totally without merit.

The suit was filed by Douglas Oberman, a senior engineer and former tool liaison chief at the C-17 plant, who asserts that McDonnell executives blocked his attempts to force subcontractors to correct the problems at their expense.

The suit does not ask for specific damages, but Oberman’s attorneys, Phillip Benson and Donald R. Warren, said the damages range from $100 million to $300 million. If those damages are eventually substantiated, the case would rank as one of the largest defense fraud cases in history. The suit charges that McDonnell accepted delivery of hundreds of large-scale aircraft tools that had major defects and charged the government, rather than the subcontractors who built the tools, for the cost of repairs. The firm also allegedly misrepresented the severity of the problems.

In the late 1980s, McDonnell was experiencing increasing problems with the massive tools used to align and assemble the plane, the suit alleges. The problems were a major part of why the program fell behind schedule and had a cost overrun of nearly $1 billion, Benson said.

The tools were required to hold massive parts to within a few thousandths of an inch, but they were delivered to McDonnell in “blatantly defective condition,” the suit alleges.

McDonnell spokesman Fred Hill said the firm conducted an exhaustive internal investigation and found no improper billing. He added that the firm had incurred substantial costs on the tools above what the government paid under the contract.