Ferrous foundry group Bradken Inc. has paid $10.89 million to resolve allegations that its Tacoma, WA, operation produced and sold substandard steel castings for installation on U.S. Navy submarines, according to a prosecution agreement reported by the U.S. Dept. of Justice.
The company and its former lab director also face criminal charges in the case.
Under a "deferred prosecution agreement," Bradken accepted responsibility for the offense and agreed to take remedial measures; If it complies with the agreement, the government will dismiss the charge after three years.
The Bradken U.S. foundries are subsidiaries of Bradken Ltd., an Australian firm, which is a subsidiary of Hitachi Construction Machinery. The Tacoma foundry (acquired by Bradken in 2008) produces high-yield steel castings used by the U.S. Navy's primary contractors to fabricate submarine hulls. The DoJ's court filings stipulate that the Tacoma foundry had for 30 years produced castings that had failed lab tests and did not meet the Navy’s standards for steel strength and toughness.
The filings further allege that the foundry's former director of metallurgy Elaine Thomas falsified test results in over 200 case to hide the fact that the steel had failed tests to confirm the quality standard. As part of the deferred prosecution agreement, Bradken admitted these allegations.
DOJ noted there is no evidence that Bradken’s management was aware of the fraud until May 2017. While the civil settlement resolves allegations that some castings Bradken produced did not conform to the Navy’s specifications, the U.S. government contends that Bradken caused shipbuilders to invoice the U.S. Navy for parts that did not meet those specifications.
Also, the U.S. government maintains that after Bradken initially disclosed the discrepancies to the Navy, it then made misleading statements suggesting that the discrepancies were not the result of fraud. Bradken admitted the misleading statements hindered the Navy’s investigation and its efforts to remediate the risks presented by the deception.
“Bradken placed the Navy’s sailors and its operations at risk. Further, after Bradken’s management discovered the falsified data, they misled the Navy about the scope and nature of the fraud. Government contractors must not tolerate fraud within their organizations, and they must be fully forthcoming with the government when they discover it,” stated U.S. Attorney Brian T. Moran. “The Navy has taken extensive steps to ensure the safe operation of the affected submarines. Those measures will result in increased costs and maintenance. Our agreement with the company is aimed at ensuring they improve their procedures and inform their peer companies about how their systems failed to detect the fraud. We hope such steps will improve the military procurement system.”