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Humvee maker wins $277M

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A rush to equip troop-carrying Humvees with protective armor during the bloodiest days of the Iraq war resulted in millions of dollars in overcharges to the federal government for which the armor provider is liable, an Indiana judge ruled this month.

Humvee maker AM General LLC of Mishawaka is owed more than $277 million by the company that supplied kits for troops to retrofit the vehicles with armor in the field dating to 2004, and for armor installed on Humvees in later years, St. Joseph Superior Judge Michael P. Scopelitis ruled in AM General LLC v. BAE Systems Inc., et al., 71D07-0907-PL00195.

In a series of rulings including a 194-page order issued April 2, Scopelitis ordered British defense contractor BAE Systems to pay judgments totaling $277,939,519 to AM General for breach of contract and violations of most-favored customer clauses.

“We intend to proceed. Post trial we have a couple of options, a motion to correct error or a notice of appeal,” said Bingham Greenebaum Doll LLP partner Karl Mulvaney, who has joined BAE’s appellate team. “We’re considering our options at this point and no decision has been made.”

Scopelitis’ April 2 order includes findings of fact that paint a picture of rampant overcharges from BAE and its predecessor companies that AM General passed on to the Army, even as AM General sought to determine true costs. Armor Holdings, which developed the retrofit armor kits, was purchased by BAE, and Armor Holdings’ executives received multi-million-dollar payments and retention bonuses, Scopelitis noted.

In April 2007, the Army required BAE to provide certified cost or pricing data to ensure that its profits were in line with those deemed reasonable for tank and vehicle purchases, generally between 5 and 15 percent. The Army’s insistence on accountability came during what would become the deadliest year of the war for American forces, when 899 service members died in Iraq.

“Because of the continuing conflict in Iraq, AMG and (the Army) faced a vital procurement obligation,” Scopelitis wrote. “To prevent Coalition forces from increasing risks due to (improvised explosive devices, the Army) needed to continue to provide armored vehicles to the Army without interruption.”

“BAE was concerned for months that disclosing its costs data would reveal excessive profits,” including markups on armor kits of 36 to more than 44 percent, according to Scopelitis’ findings. The government ultimately alleged gouging by BAE, including such allegations that windshield wiper extenders for Humvees were marked up as much as nine times more than the government would consider fair or reasonable.

BAE provided Army procurement officials with inaccurate, incomplete or defective cost estimates, the judge wrote. The company “modified its cost or pricing data to artificially inflate its cost and thereby reduce its apparent profit rate,” according to findings.

But BAE also was the supplier stipulated by the Pentagon. “This was a unique technology which we moved heaven and earth to put together, and we felt it was protected and don’t feel this was an issue,” Mulvaney said of armor pricing.

“BAE Systems strongly disagrees with the judge’s ruling in this extremely complex subcontract dispute, and will appeal the decision,” the company said in a statement. “BAE Systems is firmly committed to the principles of fair contracting and providing both value and performance in support of its many government and commercial customers.”

In 2008, the Army ordered AM General to seek an $84.5 million price reduction from BAE, according to the findings, but AM General continued to be denied access to BAE’s cost data. Scopelitis wrote that BAE declined to cut prices on its armor units sold to AM General and instead, “sought to trade the inevitable price reduction for contractual concessions from AMG.”

But AM General’s contract with BAE required BAE to supply AM General with certified cost or pricing data on request, and it required BAE to indemnify AM General, Scopelitis wrote.

By April 2012, the military informed AM General that the government had been overcharged more than $410 million due to BAE’s pricing for armored parts, according to the findings. A military review board later reduced that amount significantly, and AM General agreed to settle.

Under the settlement, the military would continue to withhold payment of more than $62 million from AM General due to BAE’s overcharges, and AM General would pay the government half of the net most-favored contractor judgment it might receive in its litigation against BAE. Scopelitis awarded $113,673,152 under that claim, so the government’s share is more than $56.8 million.

“Under Indiana law, BAE is required to indemnify AMG for the amounts that AMG reasonably agreed to give (the government) to settle its pricing claim,” Scopelitis wrote.

Meanwhile, BAE failed to persuade the court to find in its favor on claims that AM General misappropriated trade secrets when it decided to make the armored parts itself and used components from BAE and materials that the company claimed were trade secrets to reverse-engineer and manufacture the armor panels and kits.

Scopelitis ruled that the materials AM General used to develop its own armor were readily available and were not trade secrets. “Reverse engineering is lawful under trade secrets law so long as the product was obtained lawfully,” he wrote. “BAE has not established damages.”

Scopelitis ruled after a three-week trial in October in South Bend that attracted high-powered, connected legal firms on both sides.

AM General was represented by LaDue Curran Kuehn LLC of South Bend with backing from Washington powerhouse Williams & Connolly LLP. The Vault.com 2013 Law Firm Rankings based on nationwide associate surveys places Williams & Connolly as the nation’s No. 1 white-collar defense firm and No. 2 Washington, D.C., firm.

“All I’m authorized to say is the company has no comment beyond what is actually in the (court) papers,” said Paul E. Harold of LaDue Curran Keuhn, who with John LaDue represented AM General as local counsel. Williams & Connolly partner David Kendall said in an email, “We will let the decision speak for itself.”

BAE was represented by Taft Stettinius & Hollister LLP of Indianapolis and the Washington firm WilmerHale, rated the No. 3 Washington, D.C., firm in the Vault survey. William C. Wagner of Taft declined to comment. Juanita Crowley, the attorney of record for WilmerHale, has retired.

According to the Federal Contractor Misconduct Database maintained by the Project on Government Oversight at www.contractormisconduct.org, BAE is the ninth-largest U.S. government contractor with contracts worth more than $6.87 billion in fiscal year 2011. The database records 13 instances of misconduct by BAE since 1995 totaling more than $588 million.

BAE recorded international sales of more than $27 billion in 2012, according to company financial information.

An AM General spokesman said the company would not comment beyond the ruling.•
 

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  1. Am I the only one who sees that the City is essentially giving away the MSA site AND giving millions to build new buildings on the site when this site would be the perfect place for the Justice Complex? Across from City-County, check; keeping it centrally located, check, etc. It's my understanding that the GM site must be purchased by the City from Motors Liquidation Company. STOP WASTING WHAT WE ALREADY HAVE AND OUR TAX DOLLARS! The Ballard Administration has not been known for it's common sense...never voted for him and never will!

  2. This guy sounds like the classic molester/manipulator.

  3. Louis D. Brandeis was born in 1856. At 9 years of age it would have been 1865. The Brandeis family did not own slaves. My source Louis D. Brandeis: A Life, by Melvin L. Urofsky.

  4. My name is Matthew Lucas Major, I recently went through a jury trial in Bloomington , In. It was the week of Feb 19-21. Although I have been incarcerated since August 5, 2014. The reason I 'am writing to you sir is on the 21 of February the jury came in with a very excessive and wrongful verdict of guilty on 6 child molesting charges against my daughter who was 9 at the time I was accused. I also had 2 other Felonies one of Intimidation and 1 of Sexual Vicarious Gratification. Judge Marc Kellam on the second day of trial gave me a not guilty on those 2 felonies. The jury was sent out during that time and when brought back Judge Kellam told them to not concern themselves with the 2 Felonies that he ruled on them. They were told to not let evidence they had already heard influence there verdicts. I never in my life touched any child sexually and definitely not with my own daughter. When I was arrested Detective Shawn Karr told me I would be convicted guilty just on my daughters word even without evidence. That's just what happened. my public defender did me so wrong he never once proved to the court and jury all the lies the child told, and Jeremy Noel my public defender could of proven the lies easily. The stories in Serenity's depositions and Forensic interview changed and were not consistent as Prosecutor Darcie Fawcett claimed they were. Yet my attorney never mentioned that. The facts that the child accused me of full penetration in her vagina and rectum was proven lies. Doctor Roberta Hibbard of Riley hospital in Indianapolis confirmed Serenity's hymen intact, no scars, no tearing, no signs of rape to her. Yet my attorney didn't use that knowledge . the DNA was all in my favor. I tell you I will spend my entire life in prison going through rape and beatings etc. even Judge Kellam abused his authority by telling the jurors to listen and believe what the prosecutors side in evidence like my daughters testimony. In one interview with the detectives my daughter got flustered with her mom and said on camera " I'm saying what you told me to mom"!! Yet Mr. Noel said nor did anything to even resemble a defense attorney. Judge Kellam allowed edited version of a taped conversation between the child and her mother. Also Judge Kellam allowed the Prosecutor too bring in to my case a knife found under my seat, the knife wasn't part of my case. She was allowed by my attorney and the judge to put a huge picture of it on the screen and huge picture of my naked privates in a full courtroom and open court. Ms. Fawcett says to jury see how easy Mr. Major could reach the knife and cut his Childs throat. Even though I had no weapons charge against these cases. This gave the jurors prejudice thought against me thinking I threatened her with that knife and how scared she would of been knowing i could get it and kill her. On my sentencing court March 19, 2014 my public defender told Judge Kellam he wish to resign from being my attorney and wished for the court to give me outside council to file a error to trial or appeal. We were denied. Now after openly knowing my public defender don't want to represent me he has to. Well when as parents we make our kids clean a room when they really don't wish to, well the child will but don't mean she will do a good job, that's where I'm at with Mr. Noel. please dont ignore mine and my families pleas for your help . we have all the legal proof you could need to prove Im innocent. Please dont make my spend years in prison innocent when you can fix this wrong. Im not saying Im a perfect man or that I was a perfect dad to my 2 children none of us are. Ive made some bad choices in life and I paid for them. But I didnt ever touch or rape my daughter . I love my children with all my heart. And now through needing attention and a ex-wife who told my granny several times she wish she could put me in prison to get me out of their lives. Well my ex finally accomplished her goal. Sad part is she is destroying our daughter with all this horrific lies and things she taught my daughter to say. My daughter will need therapist to ever hope for a chance of a normal life after what she had done to her by her mom and their side of the family. My daughter told everyone even on stand she had a dream months before i supposedly molested her in this dream I was molesting her and when I finally did it matched her dream perfectly. She admitted to watching movies about little girls being molested and watching U-Tube videos about child molesting all before it happened supposedly to her. Doesn't that sound very unusual that a non molested 9 yr old would need to know so much about being molested? The only reason I could think a 9 year old would need so much information is to be prepared to know what to say and be able to say how it felt what took place etc.. So when questioned by authorities she would be prepared. And there again sir if a parent is pre grooming a 9 year old child she would need intimate details . Like telling her daughter about a couple moles on my private area. The child admitted to sneaking my cell and looking many many times at nudes of me and my girlfriend even one where my penis was entering my girlfriends vagina. In that picture my moles are obvious. Yet when prosecutor showed everyone in court my privates and pictures of the moles she said the only way the child would know about them is if she saw them for herself. My attorney once again said nothing about the pictures my child saw. Or could a ex-wife be able to describe my moles to help her case against getting rid of me? I beg you help me. This is my very existence. Ive lost everything , a good job, a wonderful girlfriend, my freedom, but worse thing Ive lost is my children. They were my reason to get up every morning and strive to be better. The wonderful bond I had with my Serenity is gone. After this I would be afraid to even hug her for fear of what next can they do to me. I'm not afraid to tell you I sit here in this cell and try to hold back my tears. Everyone knows you cant show weakness in prison. My life has already been threatened here at Wabash Valley Prison. After only 3 days of arrival. I was tricked into signing a waiver now Im in G Block General Population with 6 child molesting felony charges. Mrs. Hart as a 18 year old I almost died hooked to machines in hospital almost 1 month and now I know that fear was childish compared to this . I cant help but put emotions in this, after all Mrs. Hart Im human and God help Me I never been more afraid in my life. I didnt hurt my little girl I didnt touch her sexually. As much as it shreds me and fills my mind what Im facing I worry more about my mom and granny because of their great love for me mam they are suffering so deeply. I aint done this things but my loved ones suffering right along beside me and If you take my case you will be in essence freeing them also. I sent momma this letter and asked her to email it to you. I'm scared I have been done so unjustly by our legal system and I need you to fix this and give me freedom. I ask you please don't just ignore my pleas. Here in America its nice to be able to trust our legal justice system, well they destroyed my and my loved ones trust in our justice system . And I'm trusting in You !!! My entire family is suffering this nightmare with me. My 77 year old granny had a stroke and isn't doing so well. My single mother that raised 3 kids alone is dying from Lupus and since my arrest has stayed so sick and weary. Our lives torn to peices by a government I was taught I could trust in. my momma has tried so many innocent project and wrongfully accused and cant get anywhere. please please help me. A quote from the late Nelson Mandela: To be free is not merely to cast off ones chains, But to live in a way that respects and enhances The Freedom Of Others. I have Faith in you and your clinic to cast my chains off and give me freedom I do deserve as a wrongfully accused Man, son, brother, father, friend. Matthew Major DOC# 246179 Cause # : 53c02-1308-FA-000779 God Bless you. Please contact me with your decision so I know you made a life changing decision for me , just please at least write me so I know you care enough about your citizens to respond to cries for your help. You can speak openly with my mother Charlotte Spain (828) 476-0406: 71 Lakeview Dr. Canton, NC 28716 Thank You Matthew Major I know yall get thousands of request and inmates claiming innocence, and each person who are innocent deserve to have organizations like yours willing to fight for them and I give yall so much Thanks and I thank God everyday yall are out there caring enough to help free the innocents. Since discovering firsthand how easily lives and families can be destroyed by Poor Defense attorneys not doing their job . And Prosecutors allowed to do as they please in court

  5. Frankly, it is tragic that you are even considering going to an expensive, unaccredited "law school." It is extremely difficult to get a job with a degree from a real school. If you are going to make the investment of time, money, and tears into law school, it should not be to a place that won't actually enable you to practice law when you graduate.

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