U.S. Attorney Andrew Birge announced Friday that GS Engineering, Inc. (“GSE”), a defense contractor in Houghton, along with GSE’s president and GSE’s former bookkeeper, will pay a total of $1,000,000 to resolve allegations that GSE submitted false claims for lease costs under its federal defense contracts.

In connection with the settlement, GSE’s president, GSE’s former bookkeeper, and four companies that those individuals owned and controlled—Arcadian Holdings, LLC, Echo Leasing, LLC, GS Engineering Services, Inc. (d/b/a GS Infrastructure), and LJ Leasing, LLC—agreed to be voluntarily excluded from federal contracts and awards for a period of three years.

The settlement resolves allegations that between August 2009 and December 2015, GSE double-billed defense agencies by fully depreciating certain data acquisition equipment—and charging that depreciation to government contracts—before purporting to transfer and lease that same equipment back from Echo Leasing, a related company. The government also alleged that between January 2009 and November 2016, companies under GSE’s common control (Arcadian Holdings, Echo Leasing, GS Infrastructure, and LJ Leasing) leased real property and equipment to GSE at rates that exceeded allowable amounts under the Federal Acquisition Regulation.

In addition to its settlement with the U.S. Attorney’s Office, GSE entered into a three-year administrative agreement with the United States Army. The administrative agreement requires GSE to, among other things, maintain an ethics and compliance program and retain a Corporate Ethics Monitor to review and report on GSE’s compliance with government contracting requirements.

“Defense contractors cannot use their control over related companies to unnecessarily increase costs to the government,” U.S. Attorney Birge said. “My office will protect the integrity of the procurement process and ensure that contractors comply with all applicable laws.”

This case was a cooperative effort among the Defense Contract Audit Agency, the Defense Criminal Investigative Service, the United States Army Criminal Investigation Command, and the U.S. Attorney’s Office for the Western District of Michigan. Assistant U.S. Attorney Adam B. Townshend represented the United States.

The claims resolved by the settlements are allegations only. There has been no determination of liability.

In a statement, Lynn Eliason, Acting President of GS Engineering says:

"For nearly two decades, GS Engineering has provided engineering design, development and testing service to a variety of industries, including defense and aviation. Our 80+ employees are honored to serve more than 950 U.S. clients, partnering with them to provide solutions that optimize products, integrate technology, validate testing and reduce costs.

In September 2019, we voluntarily entered into a settlement with the U.S. Army and the U.S. Department of Justice to resolve a disagreement over the proper financial allocation of certain charges to government contracts completed between 2009 and 2016. The disagreement focused solely on accounting issues, not on quality, safety or timeliness of our work.

We have not been prevented from working on, bidding for or accepting new government contracts. We continued to work on all contracts during this process – and we continue to bid on projects and secure new contracts from the U.S. Army, whom we are proud to count as one of our valued clients."