According to a Dec. 9 WorkBoat.com article, the Justice Department announced that it had settled its $78 million lawsuit against Bollinger Shipyards for $8.5 million. If anyone thinks this punishes Bollinger for the conversions that doomed eight patrol boats, or recompenses the U.S. taxpayer for its wasted money, it’s important to keep things in perspective.
First, the basis of the suit was an accusation of fraud, not negligence. The government claimed that Bollinger submitted false data to support its plans for lengthening eight Island-class 110′ patrol boats by 13′, exaggerating the hulls’ longitudinal strength by 100%. The government also alleged that Bollinger claimed that it would submit the plans for the modifications to the American Bureau of Shipping for review, but failed to do so. Perhaps it feared that ABS, the nation’s foremost expert on vessel design and construction, would nix the project.
The appeals court’s ruling was especially harsh when it examined the case. It found that the government had presented sufficient evidence “to allow a factfinder to infer that [Bollinger] either knew that their statements were false or had a reckless disregard of their truth or falsity.”
In fact, when the vessels started buckling, all of the modified vessels had to be taken out of service. In other words, not only was the $78 million wasted, but the original cost of construction of these vessels, reportedly $56 million, was also wasted, resulting in a total loss for the taxpayer of $134 million, not including the cost of prosecuting the lawsuit.
Interestingly, especially for taxpayers, the Coast Guard opposed the DOJ’s lawsuit, refused to join or cooperate in it, and continued to award Bollinger new contracts even while the lawsuit was ongoing. The Coast Guard is a longtime customer of Bollinger and is currently building up to 58 Sentinel-class fast response cutters at the shipyard.
The DOJ was less accommodating. It appealed a lower court ruling throwing out the lawsuit and won a reversal in the Fifth District Court of Appeals. That court held that the lower court “erred by viewing the facts in the light most favorable to Bollinger and drawing inferences against the United States,” and sent the case back for retrial.
On the face of it, the government’s case looked strong, especially after winning the appeal, and a settlement of $8.5 million represents a return on investment to taxpayers of less than 16%. Why the government agreed to the settlement will never be known. After all, punitive damages for the fraud could have brought the total award to almost $120 million. But since the settlement addresses only the terms of the agreement, not why it was reached, U.S. taxpayers are left to scratch their heads and once again reach for their wallets.
The views and opinions expressed in this blog are the author’s and not necessarily those of WorkBoat.