Aerojet, GenCorp pay $3.3M to government to settle fraud case

The Sacramento BeeDecember 1, 2011 

Rancho Cordova-based rocket-maker Aerojet and parent GenCorp Inc. have paid $3.3 million to the federal government to settle an investigation into corporate costs.

Benjamin Wagner, the U.S. attorney based in Sacramento, said the payment settled allegations that Aerojet fraudulently included unallowable costs in calculating overhead rates, resulting in overpayments under government contracts.

The U.S. attorney's office said the probe involved allegations that Aerojet fraudulently included costs associated with resisting a 2004 takeover bid by Steel Partners Inc. in calculating its indirect overhead rate proposals submitted to the government for national defense-related contracts.

The government relies on such proposals to calculate cost-reimbursement payments to compensate companies for indirect costs.

The government said the settlement also resolves allegations that Aerojet included unallowable costs associated with a 2006 proxy contest by Pirate Capital LLC in calculating overhead rates. Federal regulations disallow reimbursement for costs associated with opposing a corporate reorganization.

"This settlement makes clear that contractors will not be permitted to overcharge the government under defense contracts. It both compensates the affected federal defense agencies for their damages and deters future unlawful conduct," Wagner said.

A filing with the U.S. Securities and Exchange Commission said the settlement agreement was reached Nov. 23. The report noted the local company "cooperated fully with the investigation" and agreed not to seek reimbursement for probe-related costs.

To read the complete article, visit www.sacbee.com.

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