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United Technologies to Pay U.S. $473 Million, Judge Says

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June 18 (Bloomberg) -- United Technologies Corp. must pay the U.S. $437 million for fraud and violations of the federal False Claims Act after overbilling for jet engines it supplied to the military, a judge said.

The company must also pay additional interest dating back as far as 1987, U.S. District Judge Thomas Rose in Dayton, Ohio, said yesterday. He told the government to calculate the interest due.

The U.S. sued United Technologies’ Pratt & Whitney unit in 1999, alleging it knowingly made false claims in a multibillion-dollar contract to produce engines for F-15 and F-16 fighter jets. Rose said the government overpaid for six years that it bought the engines from Hartford, Connecticut-based United Technologies.

“The government should not have paid the amounts that the government proved it paid as a direct result of United Technologies’ fraud,” Rose said in a 16-page order.

In 2008, after a nonjury trial, Rose initially rejected the U.S. bid for overpayment damages, while fining Pratt & Whitney $7 million for false claims. The U.S. Court of Appeals in Cincinnati sent the case back to Rose in 2010, reversing his finding that the government sustained no actual damages.

Rose said he focused on instructions from the appeals court in determining damages in yesterday’s order.

Appeal Planned

The company will appeal, Chief Financial Officer Greg Hayes said today at a meeting with analysts at the Paris Air Show.

“UTC strongly disagrees with the court’s analysis and decisions,” Hayes said. “We remain confident in our legal position.”

United Technologies rose 1.3 percent to $96.17 today in New York trading. The shares have climbed 17 percent this year.

The government claimed that it overpaid for the engines in fiscal years 1985 through 1990 because Pratt & Whitney inflated its estimated costs for some purchased parts and withheld data that would have revealed the overstatements, United Technologies said Feb. 7 in its most recent 10-K.

In his 2008 decision, Rose determined “that the Air Force had not suffered any actual damages because Pratt & Whitney had made significant price concessions,” United Technologies said in the filing.

“Pratt & Whitney continues to contend that the government suffered no actual damages,” the company said.

“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 the Feb. 7 filing.

The case is U.S. v. United Technologies Corp., 99-cv-00093, U.S. District Court, Southern District of Ohio (Dayton).

To contact the reporter on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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