Boeing Will Pay $25 Million to Settle Defense Contractor Fraud Case Involving Drones

Boeing has agreed to pay $25 million to resolve whistleblower allegations related to the manufacturing of surveillance drones for the Department of Defense.

The defense contractor fraud allegations were raised in a whistleblower lawsuit filed by D R O’Hara, a former Boeing employee. O’Hara will receive a $4.6 million reward for exposing the alleged misconduct.

Insitu, Boeing’s drone-manufacturing subsidiary, allegedly billed the government for new parts when it used recycled ones instead. According to prosecutors, the company, which supplies surveillance drones to the U.S. Special Operations Command (SOCOM) and the Navy, “knowingly submitted materially false cost and pricing data” to the DoD.

The DOJ said in a statement that between 2009 and 2017, Insitu entered into several no-bid contracts with the Navy and SOCOM to provide drones at deliberately inflated prices.

U.S. Attorney for Western Washington, Brian Moran, said in a press release, “Taxpayers deserve to get what they paid for. Cases such as this one should be seen as a warning to defense contractors that false claims have no place in military purchasing.”

A spokesperson for the DoD’s Criminal Investigative Service described the resolution of the fraud case as an “example of our agents and law enforcement partners working together to uncover fraudulent activity and protect taxpayers’ dollars entrusted to the DoD.”

The whistleblower lawsuit was filed under the False Claims Act in 2015. O’Hara had been a Boeing employee for 37 years when he was sent to work at Insitu following his employer’s acquisition of the drone manufacturer.

At Insitu, O’Hara was in charge of pricing and procurement, thus ideally placed to detect DoD contractor fraud. The Seattle Times reported that “O’Hara was stymied as he tried to uncover pricing and other data needed to validate contracts, and when he pushed for answers, his managers grew obstructive and hostile.”

According to his complaint, during his time at Insitu, O’Hara refused to sign over 100 cost certifications because he believed they might violate U.S. regulations. He eventually reported misconduct internally. “Within a few weeks, I was terminated,” O’Hara told reporters. “They made up some stuff, slanderous charges that had no basis in fact.”

Around his 40th year working for Boeing, O’Hara lost his career and was banned from ever working at the company again. His story is a cautionary tale for whistleblowers who are considering reporting fraud internally and naively believe their communications with Ethics hotlines will remain confidential. O’Hara made the same mistake. He thought his identity wouldn’t be revealed as he raised his concerns “anonymously,” yet Boeing’s executives were quickly informed of his actions.

The False Claims Act (FCA) includes anti-retaliation provisions to protect and encourage whistleblowers. Because O’Hara was fired after trying to report procurement fraud, he could sue Boeing for back pay and damages.

Defense contractor fraud is rampant in our country. The FCA enables insiders to file a lawsuit and secure a whistleblower award ranging between 15 and 30 percent of the government’s total recoveries. Without these courageous individuals, most instances of procurement fraud might never be detected, resulting in the loss of hundreds of millions of taxpayer dollars.

“We expect companies that seek to do business with the government to provide complete and accurate information so contract prices can be negotiated on a level playing field,” Acting Assistant Attorney General of the DOJ’s Civil Division Jeffrey Bossert Clark said in a statement. “This settlement demonstrates the Justice Department’s commitment to take appropriate action when it determines that taxpayer dollars have been misused.”


Steve Halperin

New York trial attorney Steve T. Halperin is a well-known litigator with extensive knowledge of whistleblower laws and the New York False Claims Act. He has 28 years of experience as one of New York’s top tier attorneys. From the Manhattan offices of HalperinBikel, Steve’s whistleblower cases can run the gamut from lawsuits against healthcare. Whistleblowers: A New Yorker’s Step By Step Guide systems and providers cheating on New York Medicaid to private companies providing worthless services, or false billings by government contractors. With hundreds of winning verdicts and favorable settlements in healthcare and corporate cases, attorney Halperin’s meticulous preparation, courtroom acuity, and client-centered professionalism create remarkable outcomes.

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