By Nate Raymond
June 18 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 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.