Grand Junction weapon manufacturer CAPCO to pay over $1 m. for U.S. Army fraud allegations

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DENVER – United States Attorney Jason R. Dunn announced that Capco, LLC (Capco), a manufacturer based in Grand Junction, Colorado, will pay the United States over $1 million to resolve civil allegations that it defrauded the United States Army in connection with contracts to manufacture weapons. 

The allegations relate to grenade launchers, known as M320s, that Capco manufactured in Grand Junction and shipped to the Army.  The United States conducted a civil investigation, with Capco’s cooperation, into whether Capco supplied the Army with weapons that did not meet contract specifications. 

According to the United States, Capco knowingly shipped M320s with barrels that did not meet the contract specifications.  Despite this knowledge, Capco certified to the Army that each shipment conformed to contract specifications.  Also, as to two shipments, Capco had reason to know that it had used the incorrect steel in manufacturing the firing pins for the M320s.  While Capco conducted an internal investigation into the potential use of incorrect steel, this investigation was inadequate and Capco did not disclose this matter to the Army.  The United States concluded that this conduct, which involved M320s shipments from July, 2016 through March, 2018, gave rise to civil liability under the False Claims Act. 

The United States was alerted to the problems in Capco’s production process by James Cole, who formerly worked as a quality engineer at Capco.  Under the False Claims Act, private citizens with knowledge of a fraud against the United States may present those allegations to the government by bringing a lawsuit on behalf of the United States under seal.  If the government’s investigation substantiates those allegations and the United States obtains a monetary recovery under the False Claims Act, the private citizen may share in that monetary recovery.  Mr. Cole filed such a lawsuit here under the False Claims Act.  Of the $1,025,429 settlement amount from Capco, Mr. Cole will recover approximately $235,000.

“We entrust our defense contractors to manufacture equipment of the highest quality for the men and women who serve our country in the U.S. Armed Forces,” said United States Attorney Jason Dunn. “Any breakdown in the production process must be swiftly and honestly addressed, and we will hold contractors fully responsible for fraudulently covering up production problems.” 

“Not conforming to contract requirements that ultimately have a direct impact on the success in combat of our brave men and women in uniform is incredibly unconscionable,” said Director Frank Robey of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit.  “Thanks to the efforts of our special agents and our other law enforcement partners, today’s settlement is possible.”

“Identifying and investigating allegations of procurement fraud, specifically poor quality or non-conforming products, is at the heart of the Department of Defense Office of Inspector General’s  (DoDIG) mission,” said Michael Mentavlos, Special Agent in Charge for the Defense Criminal Investigative Service’s (DCIS) Southwest Field Office.  “DCIS, along with or law enforcement partners will continue to identify and investigate those individuals and companies that attempt to defraud the Department of Defense and put our warfighters at risk.” 

The claims settled by this civil agreement are allegations.  In entering into this civil settlement, Capco did not admit to any liability.  

The United States Attorney’s Office thanks the U.S. Army Criminal Investigation Command and DCIS for their diligent work on this investigation.  The United States was represented in this matter by Assistant United States Attorney Andrea Wang.

In response to these allegations, CAPCO said:

After fully cooperating with an exhaustive government investigation for nearly two years, Grand Junction-based CAPCO finalized a settlement with a former employee of the company and the federal government that fully and completely resolves all claims from a November 2017 lawsuit in which Capco admitted no wrongdoing or liability. The federal government filed a motion to dismiss earlier today.

During the process, the government commended the company for its transparency and the robust safeguards that were put into place since the beginning of the investigation. Capco has no reason to believe that any concerns identified in the complaint impacted in any way the effectiveness or safety of any of its products.

CAPCO

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