One of the world’s top ship agents finds itself in very hot water in the United States. The US Department of Justice announced yesterday that it has joined and elected to proceed with a whistleblower false claims act action alleging that Inchcape Shipping Services (ISS) defrauded the US Navy by submitting false invoices for services it provided to navy ships during port calls around the world.
The whistleblower suit against Inchcape was brought under the US False Claims Act by three former senior employees of the company.
The whistleblower complaint alleges that all three resigned from the company after discovering a wide-ranging overbilling scheme and bringing it to the attention of the company’s CEO Claus Hyldager and other senior executives, only to be rebuffed in their effort to stop the fraud and prevent further illegal acts. In July 2009 the three contacted the government to provide evidence of the alleged worldwide fraud against the navy. Hyldager resigned from Inchcape three months ago.
Since 2003, the US Navy has entered into several husbanding contracts with Inchcape and its subsidiaries and has paid approximately $400m to the company to service its ships.
The whistleblower complaint describes a host of methods that Inchcape allegedly used to overcharge navy ships such as presenting false and marked-up invoices from vendors, maintaining a double set of invoices in its files to conceal the overbillings from auditors, concealing discounts, rebates and other credits from vendors that it should have passed on, failing to report its own financial interest in vendors it hired for services, and double-billing for fixed price items and again for goods and services that should have been included in the fixed-price charges.
The lawsuit seeks three times the amount of damages sustained by the US as a result of Inchcape’s false billings. The complaint was filed under seal on June 30, 2010 at a court in Washington DC and made public for the first time on Wednesday.