Relator is aware of the cavalier attitude of ICGS’s management regarding its false and fraudulent conduct in the performance of the IDS contract. His personal observations include at least the following crucial safety issues involve three (3) key areas: (1) environmental survivability of external equipment; (2) the FLIR video cable; (3) the proper labeling of all system cables; and, (4) the failure to utilize Low Smoke Cables. His awareness of Engine Upgrade and Shaft Alignment problems was as a result of personal participation in continuous status conferences with Bollinger program managers who complained about those issues. Those managers complained about not being allowed to complete the necessary Engine repairs beyond the "core repairs" to ensure the proper operation of the engines. The same managers complained about receiving substandard Propeller shafts from the associated vendors, thus resulting in improper alignment. Finally, an ICGS manager in Moorestown advised the Relator that the Hulls were not in acceptable condition and were damaged by use, age and corrosion beyond what was expected when the bid was made. As a result of all of the above, ICGS performed service in a manner that predestined the failure of the eight (8) boats due to improper and ineffective retrofitting.

Environmental Survivability of Equipment

14. Additionally, Relator knows that several critical Navigation, Sensor, Command and Control and Communications Systems did not meet environmental specifications. ICGS’s associated design and implementation flaws would lead to (1) equipment degradation or (2) premature failure, either of which would result in the boat’s inability to FOURTH AMENDED COMPLAINT – Page 9

navigate or communicate. Clearly, in such situations, serious physical harm could result to the USCG crews, the general public and the U.S. government agencies for which these vessels are providing joint mission critical support. Similarly, the same harm would harm any nation which the mission might be supporting. These failures could easily result in the loss of life.

FLIR Video Cable – Forward Looking Infra-Red (FLIR)

15. This system is used for navigation. Relator complained, because the external video cable was not weatherproofed. Failure to provide water proofing on WPB 123s would result in premature failure, the loss of system video and the loss of the ability to navigate using the FLIR system. ICGS’s failures in this regard could result in mission failure, the loss of the boat and loss of life. The consequential damages far outweighed ICGS’s desire to cut corners on costs in order to maximize profits.

before delivery of the first boat.

Impact to the Mission

29. Failure of the cables will lead to loss of system video. This will render the crucial navigation system inoperable. This situation could leave the vessel incapacitated and unable to carry out the mission. This could result in loss of life and the vessel.

Resolution

30. The requirements would have to be changed or the equipment replaced or modified to meet specs. These activities would include material and labor costs.

Cost of Resolution

31. The costs would require the replacement of the non-indicated cables and changes to documentation. This would involve material and labor charges. Relator’s estimate for remedial repairs or modifications is not less than several thousand dollars per vessel.

Relevant Details

32. Notwithstanding to objective dangers, ICGS’s management refused to swap out the improper cables and took the position that the cables would simply be replaced when they failed.

III

Physical Configuration Audit (PCA)

Non-Labeled Cables

Boat 1 (Matagorda)

Summary

33. Physical Configuration Audits (PCA) are contractually mandated inspections to ensure that the installation of the systems matches the design, relevant documentation FOURTH AMENDED COMPLAINT – Page 16

and equipment/cable labeling. The PCA of the first boat – the Matagorda – showed 80% of the cables were mislabeled. This situation could lead to mistakes being made during routine maintenance or repairs, resulting in prospective, critical system failures. Again, Relator put ICGS’s management on notice of the non-indicated cables prior to the delivery of the first boat, but ICGS refused to utilize compliant cables.

Impact to the Mission

34. The above mistakes could result in damage to critical systems such as Navigation, Sensor, Command and Control and Communications Systems. These failures could result in the boats’ inability to perform their missions and all of the attendant consequential problems and damages.

Resolution

35. Cables must be relabeled.

Cost of Resolution

36. A conservative estimate of labor and material to accomplish the remedial repairs would be $100,000 per boat.

Relevant Details

37. When notified about this cable corruption, ICGS’s management refused to make corrections. Management preferred to assign the problem to the shipyards even though ICGS gave them the incorrect labels. ICGS’s management also took the dubious position that the problem would affect only ICGS’s personnel, since we were responsible for depot maintenance and repair. In other words, ICGS was not going to correct a corrupted system that it constructed. FOURTH AMENDED COMPLAINT – Page 17

IV

Video/Camera Surveillance System

Summary

38. There is a camera surveillance system installed on the boats. It affords remote 360 degree viewing of the vessel and its perimeter. The camera system has two significant blind spots at approximately 10 and 2 O’clock as viewed from the pilot house/bridge. These blind spots are significant in size and could permit undetected access to the boats. Again, it should be noted that ICGS was fully briefed by Relator on these issues before the delivery of the first boat, and ICGS could easily have been remedied before the delivery of the first boat.

Impact to the Mission

39. Lockheed’s decision resulted in exposing the WPB 123s to undetected [enemy] access which could result in: (1) unwanted boarding of the vessel; (2) tampering with the hull; or (3) sinking the boat. This action could pose a danger to the crew, the general public and our national security interests, because the USCG shares critical communications systems with other US government law enforcement, intelligence and military agencies. These failures could predictably result in loss of life and the vessel.

Resolution: Two options

40. First, the USCG could keep the flawed system, as is, and budget for personnel to serve as watch standers to cover the blind spots; that is, as was done before the installation of the system’s cameras. This would mean the USCG would have to FOURTH AMENDED COMPLAINT – Page 18

maintain a flawed system, sacrificing the benefits of decreased manpower (and costs) previously associated with assigning staff used to watch the boats in a USCG port.

41. Second, the USCG could add the omitted camera on each boat and update the documentation, the latter of which is clearly the preferred remedy.

Cost of Resolution

42. The cost of the first option would need to be assessed by the USCG. There was a material cost savings associated with the use of the surveillance cameras.

43. The cost of the second option, by adding the omitted camera – is estimated to be $25K per boat.

Relevant Details

44. ICGS received requirements to install 2 mast mounted movable cameras. (an implementation used for quite some time in the USCG)

45. Originally ICGS was supposed to procure the cameras and install them, provide the video and control circuitry and, as well, as the shore connection box

46. The cameras’ purpose was to permit remote monitoring of the boat when in a USCG port. No watch standers would be required if the system was properly installed.

47. Internal arguments ensued within ICGS regarding who would buy the cameras.

48. Relator requested that Lockheed take over ICGS’s effort in order to stay on schedule.

49. A decision was made to install four (4) fixed cameras on the pilot house. While Relator liked the idea of fixed cameras, as one could ‘sneak’ around a moving FOURTH AMENDED COMPLAINT – Page 19

camera, Relator knew that management was assuming each camera had a 90 degree field of view. (Relator later learned that fixed cameras were selected, because ICGS did not include the control circuitry).

50. Relator asked Ships’ Integration to utilize the camera specs and ships’ design to plot the views. Ships’ Integration responded that: (1) the cameras did not afford a 90 degree field of view; and (2) mounting cameras in favorable locations would be problematic due to other items installed on the pilot house. Relator was told there would be blind spots. 51. These blinds spots were at 1 o’clock and 2 o’clock – directly over the pilot house/bridge windows. The blind spots were over 10ft wide on the deck and hundreds of yards wide to the horizon. Relator told ICGS’s management that Relator’s team needed to install one (1) more camera and shift the existing forward camera over to cover the blind spots. ICGS’s management said the "Design of Record" was 4 cameras. (No cameras had been purchased or installed at that time).

52. ICGS’s management responded by telling Relator that there was no 360 degree requirement. Relator responded that it was known that the USCG currently had ships with 2 masts mounted moving cameras that supplied 360 degree of view.

ICGS’s management refused to concede the obvious. ICGS did, however, permit Relator to talk to the USCG tech rep about the defective design.

53. The USCG Tech Rep, expressing scheduling pressure, appeared to acquiesce to ICGS’s refusals, noting that the blind spots would be covered by the locking of the pilot house/bridge windows. He thought that any covert entry would be discovered by observing broken glass. Relator inquired about how the blind spots and the locked pilot FOURTH AMENDED COMPLAINT – Page 20

house/bridge windows would prevent an intruder from planting an explosive charge on the boat, for which neither he nor ICGS offered an acceptable response. The tech rep said ICGS would have to seek a waiver for less than 360 degree coverage

54. Relator pointed out that the surveillance defect could have been remedied by simply installing an additional camera at a cost of under $1,000.

55. Some time after this the USCG security inspector inspected the boat. His report stated the boat didn’t have the standard 2 camera mast solution but that he had 4 fixed cameras, and that it appeared that the boat had 360 degree views. (This established that 360 degree view was a requirement).

56. After reading the USCG security inspector’s report Relator informed ICGS’s management that the 360 degree requirement was, indeed, valid, and that ICGS had an obligation to tell the inspector that the system had two (2), material blind spots of which they were aware.

57. ICGS’s management responded it was not ICGS’s fault that the inspector missed the blind spots, or that the inspector wrote and conducted a faulty test

58. Unaware of the blind spots and the corrupted surveillance system, the US CG accepted the design. All 8 boats have the blind spots. FOURTH AMENDED COMPLAINT – Page 21

V.

Classified Communication Certification deficiencies – SIPRNET - TEMPEST

Shielded Cabling Requirement Defects

Summary

59. The communications systems on the vessel, including secure voice systems for radio and data (SIPRNET) required certain security parameters (TEMPEST) be satisfied in order to be certified for use. There are several significant flaws in these areas including the use of non-shielded cables where shielded cables should have been used (about 100 on each boat). These deficiencies have resulted in corrupted communications systems which are exposed to the unwanted eavesdropping on all governmental organizations (including law enforcement, intelligence and military) that share the same communications systems. National security has probably already been compromised by the absence of non-shielded cables. For instance, the Coast Guard’s own press releases have stated that several of the 123s used the classified SIPRNET system on missions to Cuba. As before, these issues were acknowledged, and could easily have been remedied, before the delivery of the first boat.

Impact to the Mission

60. These defects, including the cables could easily: (1) compromise national security; (2) compromise mission operations; (3) compromise identities of protected individuals; and (4) result in the unnecessary loss of life and property. Not only is it possible for other governments to eavesdrop on "secure communications," but the defective cables enable these 8 boats to retransmit clear communications traffic from one classified circuit to another, thereby making it relatively easy for anyone, including the enemies of our FOURTH AMENDED COMPLAINT – Page 22

country, to access classified communications within a very large area, even globally.

Resolution

61. The complete rerunning of the TEMPEST and SIPRNET certification procedures need to be done – visual and instrumented. All failures should be addressed where feasible (small vessels such as the 123s sometimes receive waivers for red/black separation etc). If the visual report from ICGS is accurate and discloses the full extent of the issues (document can be provided), then the estimated cost must include replacing 100 cables and fixing other problems such as but not limited to grounding, bonding and separation failures. Additionally there would have to be documentation changes and more tests would need to be performed. Lastly, if other government agencies (law enforcement, intelligence or military) have already been compromised they would need to perform a damage assessment.

Cost of Resolution

62. If other government agencies "secured communications" have already been compromised, the remedial costs could be significant.

63. If the costs are confined to the errors in the ICGS’s Visual TEMPEST Inspection Report, rather than a full audit, the remedial costs would exceed $250,000.00 per boat.

Relevant Details

64. Again, well after the design review and the equipment was purchased, Relator’s team first received the TEMPEST requirements—the opposite of the sequence FOURTH AMENDED COMPLAINT – Page 23

which should have occurred. Those requirements called for the standard set of military sea going requirements – shielding, grounding, bonding, separation of equipment etc.

65. ICGS’s Chief Engineer on the program had directed, months before, that ICGS not buy the requisite shielded cables because they were too expensive (not bid). The requirements were never changed, and the defect was not disclosed by management.

66. Until this point, ICGS had not involved anyone on the project who had a TEMPEST background, despite the fact that ICGS’ partners had some employees with that critical background.

67. At the time the 123 Matagorda was being tested, and well after the design had been completed and most of the equipment had been procured, Lockheed technical teams contended in communications with Coast Guard technical teams that there were no TEMPEST requirements for the 123s. The Coast Guard technical authority stated that because the requirements included secret communications radio systems, TEMPEST requirements were inherently included. This is because TEMPEST requirements are standard government and industry-wide in connection with the relevant secure radio communications systems. As such, the TEMPEST standards were "requirements" and not "guidance." Lockheed’s Ship’s Integration team prepared a report on what our TEMPEST solutions should be. They did an excellent job, given that the engineer had not previously worked TEMPEST. The TEMPEST engineer whom ICGS’s Lockheed had on its staff was not asked to participate. The report clearly reported that shielded cables, among other noted relevant standards, were required for the intended use—just standard operations. FOURTH AMENDED COMPLAINT – Page 24

68. Management was informed that to remedy the defects ICGS needed to buy and install shielded cables and fix other problems such as but not limited to grounding, bonding and separation failures or seek a change of the requirements. ICGS, however, informed Relator that the design of record would stand, that it would do neither.

69. Thereafter, ICGS arranged for the TEMPEST engineer from Ships’ Integration to perform a site inspection. ICGS failed several areas, including the shielded cables issue and other problems such as but not limited to grounding, bonding and separation failures.

70. Initially, ICGS agreed to fix the "visual failures." ICGS’s management asked Relator’s team to draft an impact and resolution document. The result was that most of the fixes would add significant cost and schedule. Upon hearing this ICGS’s management decided to wait until the instrumented test to see if it could pass. No effort was made to buy or install the required shielded cables based on the visual test failure or fix other problems such as but not limited to grounding, bonding and separation failures.

71. Two and one-half (2.5) years later, all 8 boats have had the predictable SIPRNET certification problems. Relator independently confirmed that shielded cables have not been installed and other problems such as but not limited to grounding, bonding and separation failures have not been fixed. Thus, the parade of horribles continues daily.

72. Relator had contacted several TEMPEST inspectors around the country. All of them confirmed that the chances of passing a bona fide test were extremely unlikely without shielded cables. Similarly, the boats were unlikely to pass a bona fide test without fixing other problems such as but not limited to grounding, bonding and separation failures. FOURTH AMENDED COMPLAINT – Page 25

73. Relator believes that ICGS and the USCG have either: (1) gun decked the tests; or (2) lowered the requirements. On information and belief, Relator is virtually certain that every other USCG or Navy ship in the present fleet has shielded cables in their secure communication systems. Security does not otherwise exist on those ships. Ironically, ICGS took shielded cables off these boats when Relator’s team installed the non-shielded cables.

74. As the USCG now has a requirement to be able to communicate with DOD and several other law enforcement or military organizations, the communications between those entities and the USCG are at severe risk. Any enemy or foreign government monitoring these boats – from shore or from "fishing boats" will be able to pick up all the "secured communications" from these boats. Since the USCG has no shielded cables on these patrol boats, the cables will emanate like antennae. Additionally, the boats could retransmit clear bleed-over information from other circuits. The communications heard will be in the clear and easily understood. This is not a good thing, according to Homeland Security. See Exhibit "B" (E-mail complaint to CEO of Lockheed from Michael De Kort).

75. Relator has learned recently that related test result failures were illegally waived by the test branch of the USCG.

76. Regarding SIPRNET, the Department of Homeland Security IG’s report stated that the contractor admitted there were issues, but that they could not be fixed without rendering the system inoperable, without disclosing ICGS’s complicity in the corruption of the system. FOURTH AMENDED COMPLAINT – Page 26

77. Regarding SIPRNET certification organization, in April 2006, well after the boats became operational, admonished the ICGS that it would allow 45 days to correct the problems, or the accreditation would be pulled. Relator does not believe that ICGS has addressed constructively all the indicated problems, the same problems which could easily have been avoided in a time manner.

VI.

Low Smoke Cable Defects

Summary

78. Lockheed Martin failed to install Low Smoke cables on the 123s. At the time Relator left the effort, he was told that ICGS was going to waive the requirement. Since then the DHS IG Report on 123 C4SIR has concluded that granting the waiver was inappropriate and that the cables should be replaced. This defect was disclosed in the report filed by Relator with the Department of Homeland Security Inspector General ("DHS IG") in February of 2006, because the IG had requested a complete listing of any issues that Relator felt had been handled improperly - even if Relator thought the issue was closed. Information provided by Relator was the basis of the Inspector General’s 123 Report. (The issue was also included in most of Relator’s requests to Lockheed management to fix the problems on the 123s).

Impact to the Mission

79. Failure to use these cables could result in excessive damage to electronic systems even with a small fire due to residue, aid the spread of fire and create a toxic smoke which could poison the crew. FOURTH AMENDED COMPLAINT – Page 27

Resolution

80. The cables should be replaced and the documentation updated. This should include, as in other filings, a review of every C41SR asset for any similar C41SR problems.

Cost of Resolution

81. If only the 123s are affected – 80 cables per boat. If any other assets are affected then the cost would increase due to more cables being installed.

Engine Upgrades; Shaft Alignment and Hull Damages

Summary

82. The Relator was aware of the Bollinger Program Managers’ complaints to Northrop and the Coast Guard that Bollinger was unable to upgrade any of the equipment attached to the engines while they were rebuilding the engine blocks. Those managers complained that unless they or someone else performed the critical rebuilding services, the engines would not run properly and would fail prematurely. Recent events have revealed that the Program Managers’ complaints were not seriously heeded.

83. During those same, continuous status conferences with the Bollinger Program Managers, Relator also became aware of their complaints that the propeller shafts received from the associated vendor were in substandard condition. The Program Managers were extremely concerned that the shafts would not align properly. Recent events indicate that Northrop and ICGS failed to attend to this serious problem, resulting, in part, in the decommissioning of all eight (8) 123s.

84. Finally, the Relator was aware through a Lockheed employee of ICGS in Moorestown, New Jersey, that in the summer of fall of 2004 ICGS was informed that the FOURTH AMENDED COMPLAINT – Page 28

hulls were damaged beyond that which was contemplated or bid by ICGS. The damage, from use, age and corrosion, was not addressed in order to prevent the corruption of the eight (8) 123s. Recent events have indicated that ICGS management failed to address these issues, as well.

Impact to the Mission

85. Each of these issues could contribute or directly cause core ship systems failure, which apparently they have.

Resolution

86. Engine issues – Repair or replace all ancillary engine equipment and components which should have been address during the Engine Upgrades.

87. Propeller Issue – Repair or replace the propeller shafts.

88. Hull Damages – Repair, replace or engineer hull components that are required in order to ensure the integrity of the hulls.

Costs of Resolution

89. As each of the eight (8) 123s was decommissioned due to problems on the vessels, primarily associated with the mechanical, electrical and hull issues, the resulting costs would be the greater of the original upgrade cost for each vessel or the amount spent by the United States, whichever is greater; that is, assuming that $11.75 million was spent on the upgrades on each of the eight (8) 123s.

90. As a result of the decommissioning of all eight (8) 123s, the total cost or damages are, approximately, the cumulative sum of $96 million. FOURTH AMENDED COMPLAINT – Page 29

Relevant Details

91. The extent of Relator’s knowledge is being a party to the conversations on these topics. Relator’s primary responsibility was C4ISR, not hull, mechanical and electrical.

Overall Costs Associated with Resolution of the Issues

Safety Issues

Environmental Survivability of External Equipment and Cable Labeling

92. Costs associated with the resolution of these issues would primarily involve the vessel on which the discrepancies exist. However, should the vessels be part of a critical event or working jointly with other organizations in a critical event, the boats’ capabilities may be degraded to a point where the vessel is unusable, thereby posing serious risks to the mission(s) in which it is actively participating. In such an event the costs would be great, and the consequential costs could be immense. Specific costs will be estimated in following sections. However, due to recent events, Relator is aware that all eight (8) of the 123s have been decommissioned by the Coast Guard, thus resulting in at least the loss of the upgrade funds spent on the eight (8) 123s, or the sum of $96 million, and the loss of all eight (8) boats, which were previously seaworthy, due to the decommissioning of each of the boats. On information and belief, had the upgrades been properly performed, the fair market value of each of the boats would have been not less than $30 million, and that sum may be far short of the real value. Thus, the decommissioning resulted in a loss of contemplated benefits of not less than $30 million or a cumulative sum of $240 million. FOURTH AMENDED COMPLAINT – Page 30

Security Issues

93. Video Surveillance: Costs associated with the resolution of these issues would primarily involve the vessel on which the discrepancies exist. Specific costs will be estimated by discrepancy type below.

94. Classified Communications Issues – TEMPEST – Costs associated with the resolution of these issues would involve the vessels for which these have deficiencies are present, but must also include the costs relating to compromised, classified communications of several law enforcement and military organizations within our government, as well as foreign governments. In order to ascertain this cost each organization would have to evaluate whether communications have been compromised, the likely period of the infraction, as well as estimate the damage to the security of the agency or the nation. Types of information that could have been compromised:

1. Mission parameters;
2. Ship or troop location;
3. Names of protected personnel.

Total Cost Estimates - Labor and Materials

95. Minimum remedial damages for ICGS’s objective performance defects are in excess of $400,000.00 for each of Deepwater’s 123 foot patrol boats. Cumulatively, the minimum remedial amount needed to correct known and identified problems with the 123 foot patrol boats is $3,200,000.00 for the 8 boats.

96. If the boats’ Exterior Equipment Survivability is an issue across a wide array of systems the remedial costs would easily exceed $2 million per boat. FOURTH AMENDED COMPLAINT – Page 31

97. Estimated turnkey damages are $19,200,000.00 for the eight (8) boats. The damages caused by ICGS may well be an order of magnitude much greater than this sum if the "secure communications systems" of our government have been eavesdropped by criminals and enemies.

98. If these defective designs are being leveraged on other projects, per the policy of "System of Systems Requirement," there will be similar type damages for each of those platforms as well as changes that must be made. A conservative estimate of those projects’ damages, if any, would be the same costs as for the 123s, per platform.

99. If national security has been damaged as a result of breaches of the ostensible "secure communications systems," each affected organization whose communications have been compromised would have to do an audited damages assessment. This cost would be geometrically greater than the known damages outlined above.

100. Due to recent developments, it is now objectively conceded that the deficiencies and corruption attendant to the upgrades and repairs to the eight (8) 123s has resulted, at least, in the loss of the $96 million paid by the government for the upgrades and repairs. Moreover, the recent decommissioning of the eight (8) 123s and the eight (8) associated SRPs. On information and belief, if the upgrades and repairs had been properly performed, the fair market value of each of the 123s would have been not less than $30 million per boat, or, cumulatively, the sum of $240 million. That loss is real, and the United States has suffered that loss. Yet the eight (8) 123s had a pre-ICGS seaworthiness and operational value of an estimated $10 million each, all of which has been destroyed for FOURTH AMENDED COMPLAINT – Page 32

an additional cumulative loss in excess of $80 million.

FALSE CLAIMS ACT

101. This is an action which has alleged violations of the Federal False Claims Act, 31 U.S.C. §§ 3729-3732, seeking damages and civil penalties on behalf of the United States and Relator as a result of the Defendants’ false statements and claims.

102. The False Claims Act provides that any person who knowingly submits or causes to be submitted to the United States for payment or approval a false or fraudulent claim is liable to the Government for a civil penalty of not less than $5500 and not more than $11,000 for each such claim, plus three (3) times the amount of damages sustained by the Government because of the false claim.

103. The False Claims Act allows any person having knowledge of a false or fraudulent claim against the Government to bring an action in Federal District Court for himself and for the United States Government and to share in any recovery as authorized by 31 U.S.C. § 3730. Relator claims entitlement to a portion of any recovery obtained by the United States as qui tam Relator/Plaintiff is, on information and belief, the first to file and, in any event the original source for the complaints in this action.

104. Based on these provisions, Relator on behalf of the United States Government seeks through this action to recover damages and civil penalties arising from the Defendants’ submissions of false claims for payment or approval. In this case, such claims were submitted to Government entities for payment of fraudulently inflated invoices resulting in fraudulent profiteering. As a result of a fraudulent audit process, refusals to adhere to TQM (Total Quality Management), and the concealment of defective services FOURTH AMENDED COMPLAINT – Page 33

and goods, Qui tam Relator/Plaintiff believes the United States has suffered significant damages, as a result of the Defendants’ false claims, jointly and severally.

105. As required under the False Claims Act, qui tam Relator/Plaintiff has provided the offices of the Attorney General of the United States and the United States Attorney for the Northern District of Texas a statement of material evidence and information related to this complaint. That disclosure statement, supported by documentary evidence, supports the claims of wrongdoing, much of which has been previously provided to various governmental investigative agencies. The Relator continued to provide supplemental disclosures to the government as appropriate.

FALSE RECORDS AND STATEMENTS

"GUIDANCE" RATHER THAN REQUIREMENTS

106. Relator, a C4ISR expert, was a member of ICGS’s proposal-planning group for a short time in 2001 or 2002, prior to the Coast Guard awarding ICGS the Deepwater contract in July of 2002. In proposal-planning meetings, ICGS developed a strategy of persuading the Coast Guard to delete its standard "will" or "shall" language from much of the requirements portions of the Deepwater contract. ICGS’s expressed intention was to persuade the Coast Guard to replace "requirements" language with "guidance" language, allowing ICGS nearly unlimited latitude in developing the Deepwater "system of systems." ICGS planned to promise the Coast Guard that ICGS would deliver superior design and products if the Coast Guard would "untie the contractors’ hands" from firm requirements. In the course of these planning meetings, Relator objected specifically to the absence of any other C4ISR experts from the planned staffing of the Deepwater project, and objected to FOURTH AMENDED COMPLAINT – Page 34

the substitution of guidance language for requirements. ICGS not only did not staff the Deepwater team with additional qualified C4ISR experts, it removed Relator from the project, virtually guaranteeing the C4ISR would not be a superior design, but a much less adequate one.

107. About a year and a half later, in the summer of 2003, Relator was once again assigned to the Deepwater project. At that time, he learned that ICGS had succeeded with its "guidance" pitch; the contractual project requirements included guidance language rather than firm "shall" or "will" requirements.

108. ICGS did not intend or believe—and this was clear from the discussions at proposal-planning meetings attended by Relator—that guidance language rather than firm requirements language in the Deepwater contract would produce superior design and products. Rather, ICGS simply wanted the contract to give it latitude to conduct the work in whatever manner it saw fit and to limit its responsibility for any problems encountered in the course of the program. Those false statements were material to the United States Coast Guard.

109. Because of these false statements and fraudulent conduct in obtaining the Deepwater contract, every claim or request for payment submitted to the Coast Guard by ICGS under the Deepwater contract constitutes a false claim under the FCA. See, e.g., United States v. Mackby, 339 F.3d 1013, 1018 (9th Cir. 2003), cert. denied, 541 U.S. 936 (2004); United States ex. rel. Marcus v. Hess, 317 U.S. 537, 543 (1943); Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 787-88 (4th Cir. 1999) (seeking payment on a contract that was "obtained originally through false statements or fraudulent conduct," FOURTH AMENDED COMPLAINT – Page 35

violates the False Claims Act under a "fraud-in-the-inducement" theory); S. Rep. No. 99-345, at 9 (1986), reprinted in 1988 U.S.C.C.A.N. 5266, 5274 ("[E]very claim submitted under a contract, loan guarantee, or other agreement which was originally obtained by means of false statements or other corrupt or fraudulent conduct, or in violation of any statute or applicable regulation, constitutes a false claim.").

VASHON

110. On or about March 9, 2005, ICGS submitted to the Coast Guard an ICGS Certificate of Conformance in connection with its delivery to the Coast Guard of the 123-foot cutter Vashon. ("Vashon Certificate," attached hereto as Exhibit C and incorporated herein by reference.) The Vashon Certificate was signed on behalf of ICGS by or for its Domain Program Manager, Quality Assurance Manager, and Director of Contracts. The Vashon Certificate certifies that:

111. The "attached acceptance document" refers to the Material Inspection and Receiving Report (sometimes referred to as "MIRR"), DD Form 250 ("Vashon DD 250"). The DD 250 is essentially a receipt, filled in by the delivering contractor for signature by the government contracting officer. The Vashon Certificate lists under the heading "Exception(s)" several variations from the applicable requirements. These are also reflected on the Vashon DD 250 in the chart in the middle of page 1 (items 15-20), which is FOURTH AMENDED COMPLAINT – Page 36

2 The Vashon Certificate and DD 250 failed to disclose camera blind spots and the failure to supply low smoke cables as well. The Coast Guard subsequently granted waivers of these failures. The Coast Guard also granted an unlawful, and thus ineffective, waiver of the failure of all TEMPEST items to pass visual and instrumental inspections.

continued on page 2. The DD 250 item 15-20 chart first lists the item delivered—the "WPB 123 conversion, shipset #3" (incorrectly referred to in box 16 as the Nunivak rather than the Vashon, as correctly indicated in box 13), and the contractual unit price. Below this are indicated the exceptions with dollar values, which are subtracted from the contract unit price, yielding the price to be paid by the Government. Neither the Vashon Certificate nor the accompanying Vashon DD 250 reflects any exception for (1) topside/exterior equipment, (2) TEMPEST (Telecommunications Electronics Material Protected from Emanating Spurious Transmissions) items, such as shielded cables, or (3) HME (hull, mechanical, and electrical) issues, including shaft problems.2

112. ICGS knew and failed to disclose, however, that (1) topside equipment did not conform to requirements; (2) TEMPEST items failed to pass visual and instrumental inspections, including, inter alia, failure to provide shielded cables; (3) hull, mechanical, and electrical items failed to comply with requirements, including major problems with shaft alignment due to the hulls buckling.

113. At the top of the Vashon DD 250 item 15-20 chart in columns 19 and 20, the "unit price" for the cutter Vashon is reflected--$6,866,302.00. At the end of the chart, on page 2, the Vashon DD 250 reflects an amount paid to date, $5,746,168.00, and a handwritten total invoice amount due of $1,004,738.50, with a handwritten notation, "pd 3/15/05." These two amounts plus the indicated values of the exceptions total $6,866,302.00—that is to say, the Government paid in full the contract price for the Vashon FOURTH AMENDED COMPLAINT – Page 37

minus the value of the items specifically listed as exceptions from the contract requirements, including those items ICGS knowingly failed to list as exceptions. Box 6 of the Vashon DD 250 provides the related ICGS invoice number, ICGS030048 03/07/05. The final page of Exhibit C is a "Payment Approval" authorizing payment for that invoice in the amount of $1,004,738.50.

114. These documents demonstrate that ICGS made false statements to the Coast Guard in connection with claims for payment, that ICGS made claims for payment in the form of multiple invoices including ICGS030048, and that the Coast Guard paid ICGS $6,750,906.50 for the cutter Vashon.

115. Because of the undisclosed problems, especially the hull/shaft problems, the total cost paid by the United States for the retrofitting of the Vashon was a total waste. Every penny was wasted, because the Defendants’ failures rendered the boat unfit and so unseaworthy that it cannot be operated safely in any environment. The Vashon reportedly will be scuttled by the Coast Guard, on information and belief, after the resolution of all of the litigation related to the 123 cutters. The Coast Guard would not have paid ICGS for the retrofitting under the contract if ICGS had not concealed its failures and its destruction of the pre-existing seaworthiness of the Vashon.

116. Thus, in addition to the total loss of the Government's payments for the retrofitting of the vessel, the Vashon lost all of its pre-existing market value, estimated at in excess of $10 million.

MATAGORDA

117. On or about March 1, 2004, ICGS submitted to the Coast Guard an ICGS FOURTH AMENDED COMPLAINT – Page 38

Certificate of Conformance in connection with its delivery to the Coast Guard of the 123-foot cutter Matagorda. ("Matagorda Certificate," attached hereto as Exhibit D and incorporated herein by reference.) The Matagorda Certificate was signed on behalf of ICGS by or for its Director of Contracts. The Matagorda Certificate certifies that:

118. In addition, on or about March 1, 2004, in connection with the delivery of the Matagorda to the Coast Guard, Lockheed Martin submitted to the Coast Guard an "External Certification of Conformance" signed by Lockheed Martin Corporation Maritime Systems & Sensors’ ("MS2") Authorized Quality Representative and Authorized Contract’s Representative. ("External Certificate" attached hereto with Matagorda Certificate as Exhibit D and incorporated herein by reference.) The External Certificate applies to "C4ISR Equipment Integration, Installation, Testing & Training for the CGC Matagorda 123." The External Certificate certifies:

119. The Matagorda Certificate lists multiple "Exception(s)" from the certified applicable requirements. FOURTH AMENDED COMPLAINT – Page 39

3 The Matagorda Certificate, External Certificate, and DD 250 failed to disclose camera blind spots and the failure to supply low smoke cables as well. The Coast Guard subsequently granted waivers of these failures. The Coast Guard also granted an unlawful, and thus ineffective, waiver of the failure of all TEMPEST items to pass visual and instrumental inspections.

120. These are also reflected on the Matagorda DD 250 in the chart in the middle of page 1 (items 15-20), which is continued on page 2. The DD 250 item 15-20 chart first lists the item delivered—the "Services and Supplies: Matagorda, WPB 123 conversion," and the contractual unit price. Below this are indicated the exceptions with dollar values, which are subtracted from the contract unit price, yielding the price to be paid by the Government. The Matagorda Certificate, External Certificate, and Matagorda DD 250 do not reflect any exceptions for (1) topside/exterior equipment, or (2) HME (hull, mechanical, and electrical) issues, including shaft problems. They reflect "Tempest and Classified Testing $121,000" in connection with TEMPEST equipment.3

121. ICGS knew and failed to disclose, however, that (1) topside equipment did not conform to requirements; (2) shielded cables and other required TEMPEST items were not provided and would not pass testing; (3) hull, mechanical, and electrical items failed to comply with requirements, including major problems with shaft alignment due to the hulls buckling.

122. At the top of the Matagorda DD 250 item 15-20 chart in columns 19 and 20, the "unit price" for the cutter Matagorda is reflected--$14,875,235.00. At the end of the chart, on page 2, the Matagorda DD 250 reflects a total invoice amount due of $14,211,420.00, reflecting the unit price less the disclosed exceptions. The Coast Guard Contracting Officer, Catherine Martindale, signed the Matagorda DD250 in box 22, indicating that the Matagorda was "received in apparent good condition except as noted." FOURTH AMENDED COMPLAINT – Page 40

Box 6 on page 1 of the Matagorda DD 250 indicates the related invoice number and date "ICGS0300-0008/ 03/01/04." These documents demonstrate that ICGS made false statements to the Coast Guard in connection with claims for payment, and that ICGS made one or more claims for payment in the form of invoices including ICGS0300-0008/ 03/01/04 for at least $14,211,420.00.

123. Because of the undisclosed problems, especially the hull/shaft problems, the total cost paid by the United States for the retrofitting of the Matagorda was a total waste. Every penny was wasted, because the Defendants’ failures rendered the boat unfit and so unseaworthy that it cannot be operated safely in any environment. The Matagorda reportedly will be scuttled by the Coast Guard, on information and belief, after the resolution of all of the litigation related to the 123 cutters. The Coast Guard would not have paid ICGS for the retrofitting under the contract if ICGS had not concealed its failures and its destruction of the pre-existing seaworthiness of the Matagorda.

124. Thus, in addition to the total loss of the Government's payments for the retrofitting of the vessel, the Matagorda lost all of its pre-existing market value, estimated at in excess of $10 million.

METOMPKIN

125. On or about May 13, 2004, ICGS submitted to the Coast Guard an ICGS Certificate of Conformance in connection with its delivery to the Coast Guard of the 123-foot cutter Metompkin. ("Metompkin Certificate," attached hereto as Exhibit E and incorporated herein by reference.) The Metompkin Certificate was signed on behalf of ICGS by or for its Domain Program Manager, Quality Assurance Manager, and Director of FOURTH AMENDED COMPLAINT – Page 41

4 The Metompkin Certificate and DD 250 failed to disclose camera blind spots as well. The Coast Guard subsequently granted waivers of this failures and the failure to provide low smoke cables. The Coast Guard also granted an unlawful, and thus ineffective, waiver of the failure of all TEMPEST items to pass visual and instrumental inspections.

Contracts. The Metompkin Certificate certifies that:

126. The Metompkin Certificate lists under the heading "Exception(s)" several variations from the applicable requirements. These are also reflected on the Metompkin DD 250 in the chart in the middle of page 1 (items 15-20), which is continued on page 2. The DD 250 item 15-20 chart first lists the item delivered—"Services and Supplies: Metompkin, (thru/mod 5w/o lock) WPB 123 conversion," and the contractual unit price. Below this are indicated the exceptions with dollar values, which are subtracted from the contract unit price, yielding the price to be paid by the Government. Neither the Metompkin Certificate nor the accompanying Metompkin DD 250 reflects any exception for (1) topside/exterior equipment, or (2) HME (hull, mechanical, and electrical) issues, including shaft problems.4 "TEMPEST POA&M" (Plan of Action and Milestones) is excepted, but the documents fail to except numerous missing or inadequate TEMPEST items.

127. ICGS knew and failed to disclose, however, that (1) topside equipment did not conform to requirements; (2) numerous TEMPEST items did not meet requirements; and (3) hull, mechanical, and electrical items failed to comply with requirements, including major problems with shaft alignment due to the hulls buckling. FOURTH AMENDED COMPLAINT – Page 42

128. At the top of the Metompkin DD 250 item 15-20 chart in columns 19 and 20, the "unit price" for the cutter Metompkin is reflected--$7,288,106.00. At the end of the chart, on page 2, the Metompkin DD 250 reflects an amount paid to date, $5,752,765.00, and a total invoice amount due of $1,181,807.53. These two amounts plus the indicated values of the exceptions total $7,288106.00—that is to say, the Government paid in full the contract price for the Metompkin minus the value of the items specifically listed as exceptions from the contract requirements, including those items ICGS knowingly failed to list as exceptions. Box 6 of the Metompkin DD 250 provides the related ICGS invoice number, ICGS0300-0016/ 05/13/04. These documents demonstrate that ICGS made false statements to the Coast Guard in connection with claims for payment, that ICGS made claims for payment in the form of multiple invoices including ICGS0300-0016/ 05/13/04, and that the Coast Guard paid ICGS at least $5,752,765.00 for the cutter Metompkin.

129. Because of the undisclosed problems, especially the hull/shaft problems, the total cost paid by the United States for the retrofitting of the Metompkin was a total waste. Every penny was wasted, because the Defendants’ failures rendered the boat unfit and so unseaworthy that it cannot be operated safely in any environment. The Metompkin reportedly will be scuttled by the Coast Guard, on information and belief, after the resolution of all of the litigation related to the 123 cutters. The Coast Guard would not have paid ICGS for the retrofitting under the contract if ICGS had not concealed its failures and its destruction of the pre-existing seaworthiness of the Metompkin.

130. Thus, in addition to the total loss of the Government's payments for the retrofitting of the vessel, the Metompkin lost all of its pre-existing market value, estimated at FOURTH AMENDED COMPLAINT – Page 43

in excess of $10 million.

PADRE

131. On or about June 24, 2004, ICGS submitted to the Coast Guard an ICGS Certificate of Conformance in connection with its delivery to the Coast Guard of the 123-foot cutter Padre. ("Padre Certificate," attached hereto as Exhibit F and incorporated herein by reference.) The Padre Certificate was signed on behalf of ICGS by or for its Domain Program Manager, Quality Assurance Manager, and Director of Contracts. The Padre Certificate certifies that:

132. The Padre Certificate lists under the heading "Exception(s)" several variations from the applicable requirements. These are also reflected on the Padre DD 250 in the chart in the middle of page 1 (items 15-20), which is continued on page 2. The DD 250 item 15-20 chart first lists the item delivered—"Services and Supplies: Padre, (thru/mod 2) WPB 123 conversion," and the contractual unit price. Below this are indicated the exceptions with dollar values, which are subtracted from the contract unit price, yielding the price to be paid by the Government.

133. Neither the Padre Certificate nor the accompanying Padre DD 250 reflects any exception for (1) topside/exterior equipment, or (2) HME (hull, mechanical, and FOURTH AMENDED COMPLAINT – Page 44

5 The Padre Certificate and DD 250 failed to disclose camera blind spots and the failure to supply low smoke cables as well. The Coast Guard subsequently granted waivers of these failures. The Coast Guard also granted an unlawful, and thus ineffective, waiver of the failure of all TEMPEST items to pass visual and instrumental inspections.

electrical) issues, including shaft problems.5 "TEMPEST POA&M" (Plan of Action and Milestones) is excepted, but the documents fail to except numerous missing or inadequate TEMPEST items.

134. ICGS knew and failed to disclose, however, that (1) topside equipment did not conform to requirements; (2) numerous TEMPEST items did not meet requirements, including, inter alia, failure to provide shielded cables; and (3) hull, mechanical, and electrical items failed to comply with requirements, including major problems with shaft alignment due to the hulls buckling.

135. At the top of the Padre DD 250 item 15-20 chart in columns 19 and 20, the "unit price" for the cutter Padre is reflected--$7,080,060.00. At the end of the chart, on page 2, the Padre DD 250 reflects an amount paid to date, $5,746,348.00, and a total invoice amount due of $1,114,834.29. These two amounts plus the indicated values of the exceptions total $7,080,060.00—that is to say, the Government was billed the contract price for the Padre minus the value of the items specifically listed as exceptions from the contract requirements, including those items ICGS knowingly failed to list as exceptions. Box 6 of the Padre DD 250 provides the related ICGS invoice number, ICGS030023 06/24/04. These documents demonstrate that ICGS made false statements to the Coast Guard in connection with claims for payment, that ICGS made claims for payment in the form of multiple invoices including ICGS030023 06/24/04, and that the Coast Guard paid ICGS at least $5,746,348.00 for the cutter Padre. FOURTH AMENDED COMPLAINT – Page 45

136. Because of the undisclosed problems, especially the hull/shaft problems, the total cost paid by the United States for the retrofitting of the Padre was a total waste. Every penny was wasted, because the Defendants’ failures rendered the boat unfit and so unseaworthy that it cannot be operated safely in any environment. The Padre reportedly will be scuttled by the Coast Guard, on information and belief, after the resolution of all of the litigation related to the 123 cutters. The Coast Guard would not have paid ICGS for the retrofitting under the contract if ICGS had not concealed its failures and its destruction of the pre-existing seaworthiness of the Padre.

137. Thus, in addition to the total loss of the Government's payments for the retrofitting of the vessel, the Padre lost all of its pre-existing market value, estimated at in excess of $10 million.

ATTU

138. On or about August 2, 2004, ICGS submitted to the Coast Guard an ICGS Certificate of Conformance in connection with its delivery to the Coast Guard of the 123-foot cutter Attu. ("Attu Certificate," attached hereto as Exhibit G and incorporated herein by reference.) The Attu Certificate was signed on behalf of ICGS by or for its Domain Program Manager, Quality Assurance Manager, and Director of Contracts. The Attu Certificate certifies that: