Whistleblower Uncovers Woodward MPC Fraud

 - October 20, 2009, 1:25 PM

Aerospace contractor MPC International has agreed to pay $22.5 million to the federal government to resolve procurement fraud allegations that the company falsely billed the Department of Defense over a seven-year period. Skokie, Ill.-based MPC, acquired in October last year by Woodward Governor and renamed Woodward MPC, will pay a total of $25 million to the U.S., which includes $2.5 million in fines in related criminal prosecution, the U.S. Department of Justice announced. According to whistleblower lawyer Mark Allen Kleiman, the Pentagon had barred Woodward MPC from government contracts for approximately a year until it recently executed a three-year administrative agreement with the DOD that included enhanced ethics implementation. Joe Caputo, a former long-time pricing analyst for MPC, had been fired on a pretext in fall 2000 after refusing his employer’s instructions to continue falsifying documents that were being provided to the government. He was rehired approximately a year later, resuming his duties but secretly cooperating undercover with federal authorities gathering information that led to the settlement. “Caputo took personal risks to secretly record workplace conversations for the authorities and then spent more than 1,000 hours helping government investigators analyze company accounting documents,” Kleiman told AIN. “This is really one of the cruder frauds–printing out phony backup materials and denying that you have a single scrap of paper from vendors supporting that material. It can work only if there’s a near-total breakdown of the audit system,” Kleiman said. MPC’s schemes to defraud the DOD were designed to maintain high profit margins and help win private industry contracts by creating false pricing data, according to Kleiman. The government paid high prices for MPC parts, allowing MPC to discount its rates to private industry in which it sought to gain a greater foothold. In settling the civil matter, MPC denied any liability, wrongdoing or improper conduct. Woodward did not respond to a request for an interview.