Department Of Justice Investigating AeroVironment Billing Practices


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Department Of Justice Investigating AeroVironment Billing Practices

Steve Hall

June 28, 2010 – The Department of Justice is conducting a civil investigation on AeroVironment, Inc., a manufacturer of unmanned Aircraft Systems (UAS) for its billing practices.


The investigation will focus on the appropriateness of certain expenses included in AV’s fiscal year 2006 Incurred Indirect Cost Claim (reconciliation of projected rates to actual rates), billing labor rates associated with time and materials government contracts and billing rates for Small Unmanned Aircraft Systems maintenance and repair contracts.


AeroVironment, Inc. noted in its Annual Report on Form 10-K filed on June 25, 2010 that it is currently cooperating with an investigation by the Civil Fraud Section of the United States Department of Justice with respect to certain of its billing practices.


Based on AeroVironment’s current understanding of the matters identified, the company believes that the outcome of the investigation will not have a material impact on its business. In addition, the commencement of this investigation has had no apparent impact on the company’s ability to receive government contracts. In fact, AeroVironment has received orders from the government in excess of $50 million since February 2010.


AeroVironment notes that it believes the majority of the issues identified in the notice have been previously addressed during Defense Contract Audit Agency (DCAA) audit processes, and that AeroVironment was notified by the DCAA in February 2010 that the DCAA deemed its accounting system to be adequate for accumulating and billing costs under government contracts.


In addition, time and materials government contracts have accounted for less than 1% of the company’s revenue over the last 6 years. AeroVironment is voluntarily cooperating with a request for information received in connection with this investigation. No claim has been filed against AeroVironment to date.


The resignation of Stephen Wright as Chief Financial Officer of AeroVironment, Inc. in March 2010 was motivated by personal reasons and was unrelated to the commencement of the investigation by the Department of Justice or any other AeroVironment operational matters.


AeroVironment is a technology company that designs, develops, produces and supports an advanced portfolio of Unmanned Aircraft Systems (UAS) and efficient electric energy systems. Agencies of the U.S. Department of Defense and allied military services use the company’s battery-powered, hand-launched UAS to provide situational awareness to tactical operating units through real-time, airborne reconnaissance, surveillance and target acquisition.


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