A New York federal judge has ruled that the bankruptcy court erred when it allowed Hawker Beechcraft Corp. (“Hawker”) to discharge damages and penalties that could stem from a whistleblowers’ qui tam lawsuit alleging it violated the False Claims Act.
In 2007, Donald Minge and David Kiehl, former employees of TECT Aerospace and TECT Wellington (collectively “TECT”), filed a whistleblower lawsuit under the qui tam provisions of the False Claims Act against TECT and Hawker. TECT is a government subcontractor that manufacturers airplane parts for airplane manufacturers such as Hawker. According to the qui tam complaint, in January 1996, Hawker was awarded a contract to provide T-6A and King Air aircraft to the U.S. Air Force and the U.S. Navy’s Joint Primary Aircraft Training System program.
According to the complaint, Hawker and it subcontractors, such as TECT, were to perform the contact pursuant to certain drawings and specifications. The whistleblowers’ complaint alleged that TECT and Hawker knowingly misrepresented to the federal government that the airplanes they provided to the government complied with contract specifications, when, in fact, they did not.
Specifically, the whistleblowers alleged that wing spars for the aircraft, the part that gives the wing of the aircraft its strength, were “hot formed,” a process that can cause wrinkles in the metal, and workers used hammers and crowbars to pound the wrinkles out, so the parts would pass inspection. According to the complaint, this process did not comply with manufacturing specifications. The whistleblowers alleged that TECT and Hawker submitted false claims to the government when it certified that the planes complied with contract specifications when they did not.
In 2012, Hawker filed for Chapter 11 bankruptcy protection. The bankruptcy court found that debt potentially due to the federal government as a result of the False Claims Act case was dischargeable. Hawker emerged from bankruptcy protection in February 2013 and was sold to Textron, the parent company of Cessna.
The whistleblowers subsequently appealed. U.S. District Judge P. Kevin Castel determined that the qui tam claims should not be discharged in bankruptcy because the whistleblowers plainly alleged fraud by the debtor in a contract with a government agency. The proceeding was remanded back to the bankruptcy court for further proceedings.
If the whistleblowers are ultimately successful, they will receive a portion of any monies recovered by the government as their reward under the qui tam provisions of the False Claims Act.
If you know of government fraud, click here to see if you may have a whistleblower claim.