Huntington Ingalls Industries: The Crew Worked One Hull, the Bill Named Another

In the Huntington Ingalls dive-operations settlement, the company agreed to a $7.9 million payment to resolve allegations of labor mischarging and billing for dive operations that did not occur as claimed. Combined with earlier repayments, the announced settlement recovery was approximately $9.2 million. The complaint puts a shipyard insider’s knowledge at the center of the billing story: a crew could work on one ship while its hours appeared against another.

The Justice Department announced the settlement on August 15, 2017. It concerned work on Navy and Coast Guard ships at the company’s shipyards in Pascagoula, Mississippi. A former employee brought the labor-mischarging allegations in a False Claims Act case, and the government joined it.

What the Government Alleged

The government alleged that Huntington Ingalls charged labor incurred on particular contracts to other contracts that had not incurred those costs. The civil settlement covered alleged cost mischarging dating back to 2003. Someone reviewing a crew’s total hours could miss the allegation entirely: the dispute concerned which government contract carried the work.

The settlement also resolved claims the company disclosed about dive operations supporting ship hull construction. According to the Justice Department, Huntington Ingalls allegedly billed the Navy and Coast Guard for operations that did not actually occur as claimed. Billing for work never performed is a different problem from putting real work on the wrong contract. Here, the government alleged both.

How the Hull Number Reached the Bill

The whistleblower’s complaint described Daily Time Logs carrying four-digit hull numbers that identified the ship to which work was assigned. It alleged that supervisors routinely directed subordinates to enter those numbers without regard to the hull on which the crew actually worked. The number looked like a small administrative detail. In the complaint’s account, it changed the ship credited with the labor.

One alleged instruction made that mismatch concrete. According to the complaint, an Ingalls general foreman directed a crew’s hours to Navy Destroyer DDX 5405 even though he knew the crew would be working on Navy LPD 2617. The whistleblower, himself a foreman, could identify both the actual assignment and the instruction to charge somewhere else.

The complaint connected those allocations to Force Reports and, from there, to government invoices. It alleged that the face of each Force Report stated that its hourly figures were used to prepare invoices for submission to the government. The hull and order numbers therefore linked a crew’s daily work to a request for Navy or Coast Guard money.

Why the Hourly Targets Mattered

The complaint alleged that hourly targets determined whether Ingalls earned incentive payments for particular items on particular hulls. Completing an item within its assigned hours could earn the payment, while exceeding the target would reduce the incentive payment for that period.

Managers allegedly had a personal stake in the same reported result. The complaint described how their incentives followed the company’s:

According to the complaint, false hull and order allocations concealed work that had exceeded, or was about to exceed, its hourly target. Accurate Force Reports would have exposed those overruns and cost the company and its managers incentive or bonus payments. We see the absurdity in that alleged arrangement: a reward for meeting the labor target could survive because the paperwork assigned the excess labor somewhere else.

That is why the contract’s payment terms matter alongside the time record. What matters is the job the crew did, the hull that got the hours and the incentive money that rode on it.

Who Brought the Case and Who Investigated?

The former employee’s qui tam case is the one the government joined. The Justice Department announced that the employee would receive about $1.6 million from the civil case.

The Justice Department’s Civil Division and the U.S. Attorney’s Office for the Southern District of Mississippi worked on the resolution. The announcement also credited the Defense Contract Audit Agency, the Naval Criminal Investigative Service, the Coast Guard Investigative Service and the Defense Criminal Investigative Service.

The employee’s contribution began inside the work itself: knowing what the crew did and which hull appeared on the report. That is the connection at the heart of a defense contractor whistleblower claim. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

What Evidence Is Needed to Prove Fraud?

For these allegations, the evidence connects the actual work and its hull or order number to the time allocation, Force Report, invoice and incentive payment. The complaint supplies the reason each connection matters: an allocation could conceal an exceeded target, and the resulting report could support a government bill. A supervisor’s instruction also explains who chose the allocation and what that person knew about the work.

We examine those connections with the person who understands the job. A timekeeper may know the number entered, a foreman may know where the crew worked, and billing staff may know how the report reached the invoice. The contract target and payment records give that disagreement its financial meaning. We bring the operational account and the billing account together around the same work.

Real Hours Can Land on the Wrong Customer’s Bill

The government alleged a comparable transfer at AEPTEC Microsystems, doing business as 3e Technologies. In that case, hours spent on commercial work and other government fixed-price work allegedly went onto four Navy cost-plus-fixed-fee contracts. AEPTEC agreed to a civil settlement announced in April 2006.

Under cost-plus-fixed-fee terms, the government pays allowable incurred costs and a fee fixed at the outset. The alleged transfer therefore put other work’s labor onto a government reimbursement claim. The complaint against Huntington Ingalls described the incentive-payment consequence of changing hull allocations. Both accounts show why knowing that an employee worked the hours leaves a further question: whose work did those hours buy?

You Know Which Hull the Crew Worked

If you know why a dive bill or hull number disagrees with the work, speak to one of our Whistleblower Experts about the shipyard records. We work beside you to build your strongest defense contractor whistleblower case from the crew’s assignment through the government’s bill, bringing in defense contractor fraud whistleblower lawyers who understand labor allocation and incentive payments. Your knowledge of the job deserves a team that can connect it to the money and stay with you through the case.