Kustom Products Suspected of Defrauding Defense Department With Counterfeit Bolt

Federal investigators have searched the premises of Oregon-based Kustom Products, Inc. stemming from allegations that the company sold counterfeit and defective aviation locknuts to the Defense Department that were meant for use on the OH-58 A/C Kiowa helicopter. The sales at issue allegedly occurred from 2005 to 2010. In December 2011, Kustom Products and its employees were indicted on charges of government contractor fraud, wire fraud, and money laundering.

The alleged fraud was discovered by an Army National Guard Maintenance technician who found non-spec replacement lock nuts intended for use on Kiowa Warrior helicopters’ main rotor assemblies. A whistleblower, who was a former employee of Kustom Products, told the investigators that he believed the allegations against Kustom Products were accurate.

Company Defrauds Defense Department by Laundering Counterfeit Parts


Kustom Products allegedly served as a go-between to funnel counterfeiters’ products to the Defense Department. The company would order a single genuine part and hire another company to counterfeit the part for a lower price. This scheme allowed Kustom Products to make much higher profits on its 22 defense contracts to provide component parts to the Army.

There are efforts being made to provide technology that would allow the military to rapidly authenticate parts and identify any counterfeits, according to Applied DNA Sciences. Until those technologies are in place, however, whistleblowers like the former Kustom Products employee will be vital to identifying such fraud before it causes disaster.

Whistleblowers Are Vital to Uncovering Defense Contractor Fraud Before Disaster Strikes


Information from whistleblowers can provide the evidence that federal authorities need to fight government contractor fraud. When defense contractor fraud puts our troops at risk, the need to identify and stop it quickly is paramount. To encourage whistleblowers to come forward, the qui tam provisions of the False Claims Act give whistleblowers the right to file a lawsuit against the wrongdoers and to receive a share of any funds recovered.

The attorneys at Waters & Kraus have extensive experience working with whistleblowers and can guide you through the process. Contact us or call our whistleblower attorneys at 800.226.9880 to learn more about our practice and how we can assist.

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