NP Precision: Army Money for Other Bills

In the NP Precision progress-payment fraud case, the company’s president admitted in his guilty plea to diverting approximately $1.2 million in progress payments on two Army contracts for Chinook helicopter drive-shaft couplings. He requested financing for costs the business had not incurred, left subcontractors unpaid and spent the money on other obligations and personal expenses.

What the Guilty Plea Says About the Army Progress Payments

NP Precision was a machine tool business in Folcroft, Pennsylvania, producing critical hardware for military helicopters and other aircraft. Its president owned 85% of the company and was responsible for all aspects of its business.

The criminal charging announcement alleged that the misuse began as early as 2007. At his subsequent guilty plea, the president admitted requesting progress payments for costs NP Precision had not actually incurred, without intending to use the money for the costs and contracts at issue. He also admitted failing to pay subcontractors.

The diversion reached outstanding obligations on other contracts, other business expenses, and personal and family expenses. We see the absurdity in that admission: the Army was financing helicopter couplings while its money paid somebody else’s bills.

The president also admitted the consequence for delivery. The government received products very late and, many times, incomplete. Paid early. Delivered late.

How Progress Payments Put Money Ahead of Delivery

Cost-based progress payments finance work before delivery and acceptance. The Federal Acquisition Regulation’s progress-payment clause bases the calculation on eligible incurred costs and qualifying subcontract financing, less previous payments. The cost behind the request matters before the government ever sees a finished part.

That is why progress-payment fraud can begin inside the cost calculation. A purchasing transaction, an amount recorded against a contract and the financing requested from the government have to be connected.

Earlier financing also has to be cleared when delivery payments are made. That process, called liquidation, credits the progress payments against the later payment so the government does not pay twice. The financing request explains how the contractor got the money; the delivery and liquidation records explain how the advance was accounted for afterward.

For an insider, those are different places to see the problem. Accounting may see the unsupported cost in a request, purchasing may see an unpaid supplier, and contract administration may see an earlier advance left outstanding. We connect those observations to the contract’s financing terms and the particular payment they affected.

What the Company Told the Auditors

The president’s guilty plea included obstruction of a federal audit and making false claims to the government. In the same plea account, the Justice Department said he admitted making false statements to government auditors and causing others at NP Precision to make false statements too. He also admitted false claims that misrepresented progress on numerous Army and Air Force contracts so the government would continue sending progress payments.

That makes the audit response part of the payment story. Someone inside the business could know both what had happened on a job and what management wanted the government to hear about it. We examine that difference alongside the request, the claimed cost and the payment, because the president’s own admissions connected the false account of progress to continued financing.

The Justice Department named the investigators as the Major Procurement Fraud Unit of the United States Army Criminal Investigative Command, the Defense Criminal Investigative Service and the United States Air Force Office of Special Inspection. It brought the criminal case against the president.

The Records Behind the Request

The useful evidence of a false financing request connects what the contractor claimed to what its own business records show. In a case like this, we work from the contract and its changes, the request, the underlying cost entries and the supplier transactions. They show which claimed cost brought government money into the business.

An original supplier invoice and its contract assignment can explain which job an expense belongs to. The payment history can show whether the supplier received the money, while the financing request shows what the contractor represented to the government. We trace those connections with you, including where the government’s payment went when the intended supplier remained unpaid.

Production and delivery records answer the customer’s side of the same question. They show the relationship between the work financed and the product delivered, while the later payment calculation accounts for financing already received. In the president’s plea, the admitted late and incomplete products give that comparison a particular purpose: following the Army’s money through to the hardware it was buying.

A supplier’s identity matters alongside its invoice. In its 2022 report on private military and security contracting, Hidden Costs: US Private Military and Security Companies and the Risks of Corruption and Conflict, Transparency International Defence and Security recommended that prime contractors report subcontractor names, business registration, beneficial ownership and the itemized value of subcontracted services with their invoices.

We apply that visibility question to financing: which supplier, for which work, and where did the money go? A person who knows the downstream transaction may be able to explain something the total on the government’s request conceals.

A Civil Parallel in the Titan IV Case

Lockheed Martin Space Systems agreed to a $10.5 million civil settlement over allegedly obtaining premature progress payments for Titan IV. The Justice Department’s May 2008 settlement announcement described the amount as approximately twice the interest from holding the premature payments. The financial consequence of getting money early was central to that case.

The government alleged that Lockheed changed its method for calculating delivered-item costs without notice and claimed an improper adjustment to the liquidation rate. A Defense Contract Audit Agency audit preceded Lockheed’s internal review and disclosure. The alleged manipulation affected both the amount of financing and how earlier advances were cleared after delivery.

NP Precision’s president admitted a more direct diversion. The Titan IV allegations show why a financing inquiry also follows the later calculation. We look at the request that released the money and the accounting that should have credited it back to the government.

For an insider who recognizes either pattern, a False Claims Act whistleblower case connects the false payment representation to the government’s money. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

When You Saw Where the Army’s Money Went

If you saw an unsupported cost request, an unpaid supplier or an instruction to misstate progress to an auditor, speak with our whistleblower experts about the financing behind it. We work beside you to connect those decisions to the government payments and develop your strongest defense contractor whistleblower case. We bring in defense contractor whistleblower lawyers who know procurement financing and stand with you from the first conversation through the case.