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United Technologies Told to Pay $473 Million in US Lawsuit

Tuesday, 18 June 2013 06:59 PM

A federal judge has ordered United Technologies Corp. to pay $473 million plus interest for manipulating costs to win U.S. Air Force jet engine contracts in the 1980s.

The ruling by U.S. District Judge Thomas Rose in Dayton, Ohio, was issued on Monday for a 1999 lawsuit in which the Department of Justice sought reimbursement for overcharges by United Technologies subsidiary Pratt & Whitney.

Interest on the award could "be a couple or few hundred million dollars," said Christian Mayes, an analyst at Edward Jones. Rates ranged from 6 percent to 8 percent a year and would go back as far as 1986, the ruling said.

Ian Race, a spokesman for United Technologies, said the company would appeal.

"We strongly disagree with the court's opinion concerning the Fighter Engine Campaign from the 1980s," Race said in a statement on Tuesday.

Representatives for the Justice Department did not respond to requests for a comment.

Rose found United Technologies liable in 2008 under the False Claims Act, a Civil War-era law that allows the federal government to seek reimbursement from companies that submit inflated claims for payment.

At that time, the judge awarded the U.S. government $7.09 million in civil penalties but found it suffered no actual damages during the period in question thanks to price concessions from Pratt & Whitney.

He also found that administrative proceedings before the Armed Services Board of Contract Appeals had precluded the Justice Department from pursuing the claims of breach of contract, payment by mistake and unjust enrichment.

In November 2010, the 6th U.S. Circuit Court of Appeals upheld the liability finding but sent the case back to Rose to determine damages, ultimately leading to Monday's ruling.

"The government should not have paid the amounts that the government proved it paid as a direct result of United Technologies' fraud," Rose wrote.

In a filing with the U.S. Securities and Exchange Commission following the close of trading on Tuesday, United Technologies said it expected the Justice Department would continue to seek a total judgment of $660 million, including interest.

United Technologies said a government victory could materially hurt its operating results. The company posted net income last year of $5.13 billion.

"Should the government ultimately prevail, the outcome of this matter could result in a material adverse effect on our results of operations in the period in which a liability would be recognized or cash flows for the period in which damages would be paid," United Technologies said in its filing.

United Technologies shares closed Tuesday up $1.19 at $96.17 on the New York Stock Exchange.

The case is U.S. v. United Technologies Corp, U.S. District Court, Southern District of Ohio, No. 99-00093.

© 2020 Thomson/Reuters. All rights reserved.

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A federal judge has ordered United Technologies Corp. to pay $473 million plus interest for manipulating costs to win U.S. Air Force jet engine contracts in the 1980s.
Tuesday, 18 June 2013 06:59 PM
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