$25.4M settlement reached in fraudulent billing suit over provisions supplied to American troops overseas

BEAUMONT – A $25.4 million settlement has been reached in a lawsuit brought against DynCorp International and Damco U.S.A.

The United States of America, by and through qui tam Relators Robert Reddell and Robert Hendrix, brought the action under the False Claims Act.

According to the fourth amended complaint, the government unwittingly paid fraudulent bills for Damco’s work from at least 2011 to 2013. In late 2011, DynCorp, prime contractor with the U.S. Army for the provision of supplies to American troops stationed overseas, including in Afghanistan, jettisoned its freight forwarding contractor, EWC, even though EWC had consistently met its contractual requirements. In its place, DynCorp chose Damco in order to gain discounted access to Damco’s quality consolidation center in Dubai.

“While Damco’s bid appeared lower than most competitors’, its actual charges from the start of the contract performance systematically included accessorial costs that it had bid as included in its base per kilo rate, not to be separately billed,” the suit states. “Further, Damco systematically billed ‘oversize’ charges for freight that was not oversized, double-billed for ‘oversize’ and ‘dim weight’ charges on the same freight, excessive palletization fees regardless of whether goods were palletized, exorbitant fuel surcharges regardless of actual fuel price, and repeatedly billed for surcharges on multiple invoices for freight on the same plane, though the surcharges only applied once per plane.”

In addition, Damco used impermissible “lump sum” designations on its invoices and invoiced DynCorp and, in turn, the government for more freight than it actually shipped, according to the suit.

“Damco pretended it was passing on incurred costs billed by its sole aircraft provider, DFS, when in fact DFS had not incurred or billed such costs to DynCorp and had no knowledge of DynCorp’s accessorial markups in which it was receiving no part,” the suit states.

DynCorp paid the charges, though they were fraudulent, doubled the per kilo rate, and rendered Damco’s performance considerably more expensive either than EWC or Damco’s fellow bidders, the suit states.

“DynCorp allowed Damco to continually find new charges to invoice to perpetuate the same fraudulent profits, understanding that in objecting it risked exposing its own devil’s bargain with Damco to all,” the suit states. “DynCorp allowed Damco to underbid its base per kilo contract price but then reap a hefty profit from accessorial costs it had promised not to charge. Worse, DynCorp lied outright and by omission in several Justification of Awards and other disclosures to the Government about Damco’s real charges and their impropriety as well as its own receipt of illegal remuneration in exchange for hiring Damco.

“DynCorp represented Damco to the Government as the best value subcontractor even after Reddell audited Damco’s bills and reported to DynCorp Damco’s fraudulent mischaracterization of freight, made up costs, improper accessorial charges, and exorbitant bottom line.”

According to the settlement agreement, Damco and DynCorp shall pay the U.S. $17 million, $9,571,673 of which is restitution. The companies also agreed to pay $8.4 million to the relators’ counsel.

The realtors are represented by the law firms of Berg & Androphy in Houston and Strong Pipkin Bissell & Ledyard in Beaumont.

The lawsuit was filed in the U.S. District Court for the Eastern District of Texas, Beaumont Division. Case No. 1:14-cv-00086-MAC.