United Technologies’ Sikorsky Unit Probed by U.S. as Sale Looms

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United Technologies Corp. said a federal criminal probe is under way into allegations that the Sikorsky helicopter unit and two subsidiaries overbilled the U.S. government for years in connection with a 2006 Navy contract.

The U.S. Justice Department inquiry was disclosed Friday in a United Technologies filing and follows an October lawsuit against Sikorsky Aircraft and the two units, with the government alleging unjust enrichment and other violations of the False Claims Act. United Technologies gave no details of the criminal angle other than to say it was related to the suit.

Sikorsky and the subsidiaries, Derco Aerospace and Sikorsky Support Services Inc., “intend to cooperate fully” in the investigation, which was disclosed to the companies in a July 13 letter, United Technologies said in the filing.

United Technologies agreed this week to sell Sikorsky to Lockheed Martin Corp. for $9 billion as the company moves away from aircraft production in favor of systems manufacturing in aerospace and building services. United Technologies has said Sikorsky’s heavy reliance on government contracts limits its profitability.

The investigation “was discussed as part of the transaction with Lockheed Martin and is not expected to affect the close,” John Moran, a United Technologies spokesman, said in a statement. The companies said this week they expect to complete the deal by early 2016.

Lockheed, Justice

A Lockheed spokesman, Dan Nelson, didn’t respond to a telephone message left for comment, while Justice Department spokesman Peter Carr said he couldn’t immediately comment on the investigation.

United Technologies fell 1.8 percent to $99.31 at the close in New York, joining a slump among broad U.S. indexes. The decline capped the stock’s worst weekly drop since August 2011.

In the October lawsuit, the government said the Sikorsky units added profit and overhead costs to the price of spare parts used in the Navy’s T-34 and T-44 turboprop training planes. The U.S. said one of the companies submitted false paperwork from 2006 to 2012.

The government is seeking $148 million in damages and other penalties related to the lawsuit. Hartford, Connecticut-based United Technologies said the units have “substantial legal and factual defenses” to the claims, and the company doesn’t expect to incur a material loss in the matter.

The civil case is U.S. ex. rel Patzer v. United Technologies Corp., 11-cv-00560, U.S. District Court, Eastern District of Wisconsin (Milwaukee).

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