It’s now clear that Leonard “Fat Leonard” Francis and Glenn Defense Marine Asia weren’t the only ones overcharging the U.S. Navy by millions of dollars while providing port services to vessels overseas.
The United Kingdom-based Inchcape Shipping Services has agreed to pay $20 million to resolve allegations that they knowingly over-billed the Navy in contracts for ship husbanding services between 2005 and 2014, according to a statement released by Department of Justice.
Other than the fine, it doesn’t appear that anyone — either in the Navy or at the contractor — will face a trial or jail time.
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That’s because by settling the suit with the Navy, the company did not admit to any wrongdoing, nor was there any determination of liability by any court against them.
Instead of being the result of a Navy investigation, the settlement was the product of a whistleblower lawsuit introduced by three former senior employees of Inchcape under the False Claims Act, which has been around since the Civil War, and allows private citizens to bring suit against companies accused of bilking the government.
The False Claims Act is often used by former employees of such companies who can then receive a cut of any funds recovered.
This incident is a far cry from the Fat Leonard scandal, in which 23 military and civilian personnel have pleaded guilty in either civilian or military courts. Another 11 cases are still pending.
“Under its husbanding contracts, Inchcape pledged to ‘bring the highest level of commitment’ to obtaining goods and services for Navy ships at fair prices,” Debra Katz, partner with the law firm Katz, Marshall and Banks, said in a release.
Katz, Marshall and Banks represented one of the former employees.
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“The lawsuit alleges that, instead, Inchcape conspired with its subsidiaries and vendors to gouge the Navy wherever and whenever possible.”
Bringing the suit were Larry Cosgriff, a retired Navy intelligence officer who served as a senior vice president of Inchcape’s Government Services Division from 2007 to 2010; Noah Rudolph, a former FBI special agent who was the head of the company’s Government Services Division from 2008 to 2009; and Andrea Ford, an Inchcape government services manager from 2007 to 2010.
All three said they resigned from the company in 2010 after discovering the fraud and trying to get the company’s then-Chief Executive Claus Hyldager to fix the issue. The employees said that he refused, so the three quit and filed the suit.
The Navy joined the lawsuit in 2014 after the allegations came to light.
Hyldager resigned amid the controversy.
The lawsuit provided plenty of details of Inchcape’s overcharging of the Navy while supplying goods and services to ships at ports in Asia, Africa, Panama, North America, South America and Mexico.
Among the charges in the suit was one stating that between 2005 and 2014, Inchcape routinely inflated the prices on routine invoices by 15 percent to 20 percent, pocketing the difference as profit.
During a four-day Jebel Ali port call by the aircraft carrier Eisenhower in 2009, for example, Inchcape’s Dubai office allegedly booked a gross profit margin of $222,788.
Also between 2005 and 2014, the suit alleges the company submitted false claims for Panama Canal transits. On one claim, they charged $14,000 for two Navy ship transits of the canal, while the actual price was $7,000 total, according to the lawsuit.
In South Africa, the suit says, the company routinely marked up costs for barges, cranes, forklifts, portable toilets, tours, hotel bookings and a number of other supplies and services.
With the settlement in the books, the three former employees will split a $4.4 million share of the government’s $20 million recovery.