Contractors Reach $8M Settlement for Bad Flares

(CN) - Kilgore Flares Company and a subcontractor agreed to pay the government $8 million to settle claims that they sold the Army defective infrared countermeasure flares, the Justice Department said Monday.

Tennessee-based Kilgore Flares sells "electronics and energetic products" like flares to the U.S. military, according to the government.

The military uses infrared countermeasure flares to fight off heat-seeking missiles from enemies. The ultrafine magnesium powder used in the flares provides ignition and helps flares burn at high temperatures that mimic an airplane engine, which helps divert missiles away from U.S. aircraft.

The federal government alleged that one of Kilgore's subcontractors, ESM Group Inc., knowingly misrepresented the content of the magnesium powder it imported from China to avoid paying antidumping duties owed to the United States. Those fees prevent companies from "dumping" products on the U.S. market at prices below cost, the government says.

Kilgore was accused of using the illegally imported Chinese magnesium powder in countermeasure flares it sold to the U.S. Army. The powder from China allegedly violated domestic requirements and contractual engineering specifications.

The U.S. Department of Justice said Monday that Kilgore and ESM agreed to pay $8 million to resolve False Claims Act allegations related to the flares. Kilgore will pay $6 million, while the remaining $2 million falls on ESM.

Before the civil settlement, five former ESM employees, including former company president Charles Wright, pleaded guilty to criminal charges for the magnesium imports and were ordered to pay more than $14 million in restitution, according to the Justice Department.

Western New York U.S. Attorney William Hochul Jr. said that the settlement means "Kilgore will now ensure that similar incidents do not happen in the future."

"Our warfighters - along with everyone who relies upon them, including their families - need to know that the equipment they use is of the highest quality and dependability," Hochul said in a statement. "In this case, the magnesium flares made by Kilgore were literally the last line of defense for our brave aviators."

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