Whistleblower gets $1.8 million payday in Charleston US Navy nuclear submarine case

A whistleblower in a Charleston area case involving subcontracting work for a new generation of U.S. Navy submarines will receive a $1.8 million payday for alerting the federal government to alleged skulduggery by various companies involved in the work.

John Klausmeier, a former officer of one of the companies sued by the federal government, will get the whistleblower money, according to a U.S. Department of Justice press release Tuesday.

In all, the companies sued by the government will pay $10.5 million to settle the government’s lawsuit, a figure that includes the $1.8 million payout to the whistleblower. Details of the case were revealed in federal court records and the government press release.

“The claims resolved by the settlement are allegations only, and there has been no determination of liability,” the government said in its press release.

“Contractors and subcontractors are expected to charge no more than authorized under their contracts with the military,” said Assistant Attorney General Brett A. Shumate, head of the Justice Department’s Civil Division, in the press release. “We will continue to ensure the government gets the prices it bargained for on defense contracts.”

In its lawsuit, filed in May 2022 on the basis of Klausmeier’s allegations, the government had asked for a jury trial. If there had been a trial in an open court, a jury might have awarded a much larger sum than the $10.5 million — or a jury might have awarded less.

Klausmeier would likely have been a witness for the prosecution in any trial.

The lawsuit has been under seal for nearly four years while the government investigated the whistleblower’s allegations and negotiated to settle without going to trial.

Columbia attorney Bill Nettles, who represented the whistleblower, said “On behalf of all taxpayers, I am glad that money is flowing back into the U.S. Treasury. The reason the money is flowing back is because of the bravery of whistleblowers like Mr. Klausmeier, who put their reputation on the line for something they believe in.”

Nuclear submarines cost billions of dollars, and holding companies accountable who do work for the government is important even if the amounts are not large in relation to the total cost of the project, Nettles said. “The entire military contracting experience is the very basis of all our national defense efforts, and it requires contractors to tell the truth.”

Nettles, whose office brought whistleblower lawsuits from 2010 to 2016 while he was U.S. Attorney, and who now specializes in those lawsuits, has instigated dozens of such lawsuits under the federal False Claims Act with his attorney colleagues John Warren and Fran Trapp. Lawyers submit a draft lawsuit to the government, which then decides whether to adopt the case and do further investigation — which is what happened in this case.

Whistleblower’s allegations

The whistleblower’s allegations in the government’s lawsuit alleged double billing, work by not fully trained people and “grossly inflated” overcharges by several companies involved in subcontracting work for the next generation nuclear submarines, called Columbia class.

Columbia class nuclear submarines, which will carry ballistic missiles, are expected to come on line within the next five years and will, through 2041, gradually replace the current Ohio class of nuclear submarines. The old Ohio class submarines, which also carry ballistic missiles, were introduced in 1981, according to a lawsuit in the case.

The defendant companies in the lawsuit were W International LLC, W International SC LLC, Precision Metal Equipment Handling LLC and Edward Walker.

“W International LLC, a Michigan company, and W International SC LLC, a South Carolina company, were both engaged in the business of industrial welding and metal fabrication. Edward Walker was the Chief Executive Officer of both companies. Precision Metal Equipment Handling LLC is a Michigan company that manufactured weld tables for W International SC LLC.,” the Justice Department said in its press release.

The whistleblower

Klausmeier, a Michigan native, joined W International in 2013 and a year later became its chief operating officer.

In 2018, defendant Walker formed W International SC to secure contracts with the US Navy as well as large military contractors, according to the lawsuit.

The new South Carolina company began to operate a large welding fabrication facility in Goose Creek, a Berkeley County city north of downtown Charleston on the Cooper River.

In 2019, at Walker’s invitation, Klausmeier joined W International SC as its chief operating officer and moved to South Carolina.

He began to voice concerns about work quality and was terminated in 2021, according to the lawsuit.

“As a result of his work at W International SC, ... Klausmeier has firsthand knowledge about defendants’ fraudulent conduct,” the lawsuit said.

Overcharging on weld tables?

Allegations in the government’s lawsuit concerned millions of dollars in overcharges for items like welding tables, which are used in the welding of large assemblies. The actual cost of one weld table was $2,102, but the government had to pay $15,000 for each table, or $1.5 million for 102 weld tables — an overcharge of $1.3 million, the government’s lawsuit said.

In another order of 80 weld tables, the government was overcharged a little more than $1 million, the lawsuit alleged.

In an order for 398 welding curtains, which provide work area protection, the government was overcharged $515,350, the lawsuit alleged. In another order, the government alleged it was overcharged $130,779 for 101 weld curtains.

In an order for 50 power carts, which provide mobile power sources, the government paid $26,000 for each power cart when the actual cost was $6,000, the lawsuit alleged.

“Exploiting the procurement process for our military’s necessary materials unduly increases the burden on taxpayers,” said U.S. Attorney Bryan P. Stirling for the District of South Carolina. “We’ll continue to work with our partners to support our service members and protect our taxpayers.”

Nettles said while he and his fellow lawyers brought the whistleblower’s allegations to the attention of federal officials, the lawsuit would not have happened without “great work” by federal lawyers and investigators.

The federal officials include assistant U.S. attorney James Leventis in the U.S. Attorney Columbia office; Greg Pearson, senior trial attorney in the U.S. Department of Justice; and James Ryan, of the Department of Defense Office of Inspector General, Nettles said.

The U.S. Navy will keep a close watch on those who build the nation’s ships and submarines in these crucial times, a Navy investigator said.

“To meet global demands, the Navy must accelerate shipbuilding. However, contractors who overcharge betray the public’s trust and undermine this critical mission,” said Special Agent in Charge Greg Gross of the Naval Criminal Investigative Service Economic Crimes Field Office.