Lockheed Off the Hook for Greek Fighter Jet Deal

     CHICAGO (CN) – The 7th Circuit tossed a 22-year-old lawsuit claiming that two plane manufacturers cheated the U.S. government in a $700 million deal to supply the government of Greece with 40 F-16 fighter jets in 1987.
     The purchase was financed through a U.S. government loan, which reimbursed General Dynamics directly for the jets’ production, before Lockheed Martin took over the contract when it bought General Dynamics’ production plant.
     Dimitri Yannacopoulos, a former General Dynamics employee, first filed suit in 1989, claiming the company owed him a $39 million commission on the contract. A federal jury in Chicago rejected his claims.
     Undeterred, Yannacopoulos filed a qui tam lawsuit, which is a kind of whistleblower complaint where a litigant files on behalf of himself and his government. He accused General Dynamics of, among other things, concealing from the U.S. Defense Department that it used $50 million of the loan to support Greek business development. Including the side deal in the jet contract allowed Greece to effectively capitalize a company using U.S. funds, Yannacopoulos claimed.
     The U.S. government declined to litigate Yannacopoulos’ claims, but did file an amicus brief on his behalf.
     But agreeing to finance the operation did not violate the False Claims Act, the 7th Circuit ruled, because General Dynamic disclosed the deal to the Defense Department by submitting a copy of the contract. Nothing in the reimbursement terms prevented General Dynamic from executing such a deal, as long as it was disclosed.
     Yannacopoulos also alleged that General Dynamic had allowed U.S. funds to be misappropriated by charging an inflated $70 million for spare parts. Greece ended up purchasing spare parts from other providers.
     Failing to notify the government of the decreased spare parts order violated the terms of the reimbursement, Yannacopoulos claimed.
     But the 7th Circuit rejected that argument as well. “By basing the initial spare parts line item on a flexible estimate rather than a firm price, General Dynamics and Greece admitted their uncertainty about what that line item’s price should be. Faulty calculations are not actionable under the False Claims Act,” Judge David Hamilton wrote for a three-judge panel.
     Lockheed Martin eventually took over the contract when it acquired General Dynamics’ production plant. Yannacopoulos alleged that Lockheed had failed to alert the U.S. that it had loaned Greece more money than it needed to complete the deal. This failure would have constituted a reverse false claim, since Lockheed should have refunded the extra money to the government, Yannacopoulos said.
     But this claim also must fail, the court concluded, because the revised contracts did include refunds.
     “We’re very pleased,” said General Dynamic’s attorney, Susan Levy. “The procurement contract is a book [but] both the district court and the appeals court really understood the contract and disposed of the case.”

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