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Judge refuses to dismiss fraud lawsuit against Hanford contractor and past owner

Tri-City Herald logoTri-City Herald 1/14/2020 By Annette Cary, Tri-City Herald (Kennewick, Wash.)

A federal judge has refused to dismiss a civil lawsuit accusing Hanford contractor Mission Support Alliance and its previous owner of defrauding the federal government out of tens of millions of taxpayer dollars.

However, allegations in the lawsuit against Frank Armijo were dropped in the ruling Monday by U.S. Judge Rosanna Malouf Peterson in Spokane.

Armijo is a former Mission Support Alliance president and also a vice president of Lockheed Martin Corp., a previous owner of Mission Support Alliance.

The lawsuit brought by the Department of Justice alleges that from 2010 to 2015 Mission Support Alliance and Lockheed Martin overcharged the federal government for information technology services.

Mission Support Alliance holds the Department of Energy contract to provide information technology services at the nuclear reservation.

The lawsuit revolves, in part, around the previously intertwined financial roles of the accused companies.

Mission Support Alliance picked a subsidiary of Lockheed Martin as an information technology subcontractor, awarding Lockheed Martin Services Inc. (LMSI) a $232 million subcontract.

It was a continuation of work for Lockheed Martin Services, which also had an information technology subcontract under Fluor, the contractor before Mission Support Alliance.

The Department of Justice said that Mission Support Alliance and Lockheed Martin had been clearly told by the Department of Energy that Lockheed Martin could not earn profits on the contract for being both an owner of Mission Support Alliance and as a subcontractor to Mission Support Alliance.

But Lockheed Martin has contended that federal law allowed it to collect profits both as a Mission Support Alliance owner and as a subcontractor.

A DOE Office of Inspector General audit report in 2016 found that Mission Support Alliance improperly awarded $63.5 million in taxpayer money as profit to Lockheed Martin Services.

Lockheed Martin’s ownership of Mission Support Alliance ended in 2016 and Mission Support Alliance no longer subcontracts most of its information technology services.

Kickback allegation dismissed

The Department of Justice also accused the companies named in the lawsuit of inflating the estimates of costs to do information technology work at Hanford, increasing the money paid to Lockheed Martin Services. LMSI was paid a fixed rate for the work it performed.

The defendants in the case filed in February 2019 asked the judge to dismiss the case, strongly denying the allegations made in the lawsuit.

Defense attorneys in an October hearing before Peterson called it a classic case of federal government overreach.

Peterson ruled on Monday that the Justice Department had made arguments that were sufficient for the case to proceed to trial, with both sides providing more evidence.

However, the case against Armijo was weaker.

The Department of Justice accused Armijo of using his authority at Mission Support Alliance to secure favorable subcontract terms from Lockheed Martin Services and in turn received “kickbacks” in the form of bonuses.

Peterson ruled that the bonuses could not be considered a kickback so she permanently dismissed the portion of the lawsuit alleging kickbacks for all defendants.

Armijo also was accused “unjust enrichment,” but the Department of Justice failed to make clear whether it was referring to his Mission Support Alliance salary, his incentive pay or a combination, Peterson said.

She dismissed the count of unjust enrichment against Armijo, but will allow the Department of Justice to file an amended complaint by Feb. 14.

A schedule leading up to the trial will be set after the amendment deadline has passed, Peterson said.

Hanford was used to produce plutonium for the nation’s nuclear weapons program during World War II and the Cold War.

The nation now is spending about $2.5 billion a year on environmental cleanup of the Eastern Washington site, which is massively contaminated with radioactive and hazardous chemical waste.

Most of the work on the project is done by contractors hired by DOE.

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©2020 Tri-City Herald (Kennewick, Wash.)

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