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Federal Contractor Misconduct Database (FCMD)

The federal government routinely awards contracts to companies with histories of misconduct, including contract fraud and other violations. POGO believes that providing this website will help to improve contracting decisions and increase public knowledge of how the government spends billions of taxpayer dollars each year. Read more…

Inadequate Internal Accounting Controls and Failure to Maintain Accurate Books and Records from 2011 to 2014

Under a settlement with the Securities and Exchange Commission (SEC), L3 Technologies (formerly L-3 Communications Holdings) agreed to pay $1.6 million to settle charges that it failed to maintain accurate books and records and had inadequate internal accounting controls. An SEC investigation found that, in December 2013, L3’s Army Sustainment Division improperly recorded $17.9 million in revenue on a U.S. Army contract by creating invoices associated with unresolved claims against the Army that were not delivered when the revenue was recorded. In October 2014, following an investigation conducted by outside advisors, L3 concluded it had material weaknesses in its internal controls over financial reporting for the fiscal year ended Dec. 31, 2013 and for the first quarter of 2014. This investigation uncovered accounting errors in L3’s Aerospace Systems segment from 2011 to 2014, which, when combined with the improper accounting associated with the undelivered invoices, had the effect of overstating the company’s pre-tax income by $169 million. L3 neither admitted nor denied the SEC’s findings. The settlement was part of a long-running case exposed by a False Claims Act lawsuit filed by a former employee, Robert A. Martin (see L-3 Communications instance, “U.S. ex rel. Martin v. L-3 Communications (CONUS Replacement Center Overcharging)”).

Misconduct Type
Securities
Enforcement Agency
SEC
Contracting Party
Defense - Army
Court Type
Administrative
Disposition
Settlement
Date of SEC Order
1/11/2017
Contractors Involved Penalty
Total
L-3 Communications $1,600,000
Further Information Released
SEC Order 1/11/2017
SEC Press Release 1/11/2017

Federal Contractor Misconduct Database