A rocket-making firm that employs around 1, 500 people in Sacramento has agreed to pay the federal government $3.3 million to settle allegations that it engaged in fraudulent recordkeeping with regard to business deals earlier in the decade and then used that information to overbill the government on defense contracts.

Although the settlement is between the federal government and a business, the incidents behind the issue that the government was investigating speak to the intricacy and delicacy of corporate law and how difficult it can be for businesses to make sure they are doing everything properly.

Aerojet and its parent company GenCorp Inc. are based in Rancho Cordova. In 2004, Aerojet resisted a takeover attempt from another company. It then improperly included the costs of fighting off that attempt in its expense reports to the federal government. Those reports were important because they were used to determine how much the government had to reimburse Aerojet for defense work it performed for the government. Including those expenses made it look like it cost Aerojet more than it actually did to do business, and that apparently resulted in it receiving more reimbursement from the government.

It was a similar story in 2006, when Aerojet resisted another takeover attempt from a different company and then classified the expense associated with staving it off as overhead.

Whether Aerojet actually intended to defraud the government will probably never be determined, since this settlement ends the government's investigation. However, it is not inconceivable that the Aeroject made an honest mistake and did not realize that what it is doing is prohibited. It is for reasons like this that many business owners develop close relationships with attorneys who are familiar with business and corporate law. Working with an attorney can sometimes prevent problems like this from happening.

Source: The Sacramento Bee, "Aerojet, Gen Corp pay $3.3 million to settle fraud case," Mark Glover, Dec. 1, 2011