Feds settle fraud claims against former Lowcountry military contractor for $10.5M

Editor’s note: This article was updated Tuesday afternoon, following the announced settlement.

A day after unsealing an $80 million whistleblower lawsuit against a former Goose Creek military contractor, the federal government on Tuesday said it has reached a settlement in the case.

W International and company CEO Ed Walker, along with another Walker-owned company called Precision Material Equipment Handling Co. LLC, will pay $10.5 million to resolve allegations in the lawsuit, which claimed the three defendants violated the federal False Claims Act.

Walker and his companies were accused of bilking millions of dollars from federal contracts for the construction of the U.S. Navy’s next-generation nuclear submarine, overbilling the government for labor and materials while executives pocketed much of the money.

“Contractors and subcontractors are expected to charge no more than authorized under their contracts with the military,” said Brett Shumate, assistant attorney general and head of the U.S. Justice Department’s civil division.

“We will continue to ensure the government gets the prices it bargained for on defense contracts,” Shumate said in a written statement.

John Klausmeier, a former chief operating officer at W International, will receive $1.8 million as the whistleblower in the case. Klausmeier moved to South Carolina in 2019 to become chief operating officer of the Goose Creek site. He was fired in October 2021.

 “Fraud on DoD (Department of Defense) contracts diverts critical taxpayer resources away from our warfighters,” Christopher Dillard, a special agent in charge for the department’s inspector general, said in a written statement.

Dillard said the agency “will continue to work closely with our law enforcement partners to investigate those who seek to exploit the system for personal gain.”

The lawsuit had been sealed from public view since 2022, when the government was first notified of potential wrongdoing at W International.

Walker could not be reached for comment. He lives in Michigan, according to the lawsuit.

The alleged fraud dates to 2019, when Walker moved W International to Bushy Park Road in the Charleston International Manufacturing Center with the aim of obtaining government shipbuilding contracts.

W International’s assets were acquired last year by military contractor Newport News Shipbuilding, which builds Navy warships, including aircraft carriers. Newport News Shipbuilding is not a part of the lawsuit.

According to court documents, W International received $80 million from federal government programs in 2019 and 2020 to help establish a metal fabrication firm that could make parts for the Navy’s Columbia-class submarines, the newest design replacing aging models.

Some of those federal funds were administered by another defendant: General Dynamics Electric Boat, the military’s main submarine contractor and W International’s top customer. A spokeswoman for Electric Boat declined to comment Tuesday.

W International “grossly inflated the price” of equipment it sold to Electric Boat, court documents state, and charged for labor that didn’t take place.

For example, Electric Boat purchased hundreds of welding/leveling tables — a type of adjustable metal table — from W International at a cost of $15,000 per table. W International’s actual cost for the tables, including labor, was $2,100 apiece.

W International also took federal money to purportedly train and certify welders, although court documents state the company “provided little training to its employees” at the Goose Creek site. Instead of setting up a training program for welders, W International primarily trained its welders “on the job,” the lawsuit states.

W International also inflated the price of equipment and double-billed for labor costs under another federal program meant to help private companies produce materials for national defense. W International outsourced the production of some of that equipment to a purported third party that was, in fact, a wholly owned subsidiary of Walker’s company, court documents state.

W International “engaged in bid rigging to further increase its profits and conceal its inflated material costs and labor costs,” the lawsuit states.

As a result of the alleged fraud, the quality of W International’s products “suffered greatly, which has jeopardized the efficient production of the submarine fleet and jeopardized the lives of workers and sailors,” according to court documents.

W International was originally located in Michigan, where it hoped to supply the automotive industry with fabricated metal products. But the company racked up millions of dollars in debt and was unable to pay its employees, vendors and suppliers, according to the lawsuit.

Walker then shifted focus, looking to take advantage of lucrative Navy contracts at a new site in the Lowcountry, the lawsuit states.

South Carolina’s Department of Commerce heralded the move, stating in late 2018 that W International planned to invest $35.2 million and create 600 jobs at the Goose Creek site. The state also approved tax credits and a $2 million grant to help the company get its foothold.

Under the federal False Claims Act, the government is seeking restitution of up to three times the amount of the alleged fraud. Whistleblowers typically receive between 15% and 30% of that amount for bringing the matter to investigators.

The government named Electric Boat as a defendant because, as the Navy’s primary submarine contractor, the Connecticut company knew or should have known about the alleged fraud. The company is not a part of the settlement announced on Tuesday.

SC Daily Gazette reporter David Wren first reported on W International’s troubles in 2024, after obtaining a copy of a civil investigative demand letter issued to the company by the Department of Justice.

That 12-page letter, which is similar to a subpoena, said investigators were looking into potential violations of the federal False Claims Act, which is meant to deter and punish defense contractor fraud.

In the midst of the federal investigation, Newport News Shipbuilding — a division of Huntington Ingalls Industries — completed its acquisition of W International’s assets in early 2025. Newport News Shipbuilding, the Navy’s largest shipbuilder, said it did not acquire any of W International’s legal or financial liabilities.

Operations continue with Newport News Shipbuilding, which kept most of W International’s employees. State tax incentives transferred to the buyer.