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Originally published August 14, 2009 at 9:45 AM | Page modified August 14, 2009 at 9:45 AM

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Boeing settles over KC-10 work

Boeing will pay the federal government $25 million to resolve allegations the company performed defective work on the entire fleet of KC-10 Extender aerial-refueling aircraft.

Bloomberg News

Boeing will pay the federal government $25 million to resolve allegations the company performed defective work on the entire fleet of KC-10 Extender aerial-refueling aircraft.

The lawsuit alleged the company's installation in San Antonio of insulation-blanket kits was defective and that Boeing overcharged the government, the Justice Department said Thursday in a statement.

The kits consist of several thousand insulation blankets installed on the inside surfaces of the fuselage that help regulate temperature, reduce noise inside the plane and provide a vapor barrier to reduce moisture-related corrosion.

The KC-10 is "a mainstay" of the Air Force's refueling fleet in Iraq and Afghanistan, the Justice Department said.

Boeing said it disagreed with the Justice Department's claims.

"Our customer opted for a blanket design by another company rather than the original design," Boeing spokesman Forrest S. Gossett said in a phone interview. "We installed the blankets and we stand behind our installation, and we elected at this time to settle with the government and move forward."

The settlement includes an $18.4 million cash payment and $6.6 million worth of repair work to fix the planes' insulation, the Justice Department said.

The case was originally filed in Texas by two former Boeing employees, Anthony Rico and Fernando de la Garza, under whistle-blower provisions that will provide the two with a $2.63 million share of the settlement.

The KC-10, a modified Boeing DC-10, first flew in 1980. Most of the planes are still in service and carry people and cargo when not carrying fuel.

Boeing in 1998 was awarded a contract, which it said at the time had a potential value of $1.5 billion over nine years, to provide logistics support for the Air Force's fleet of 59 KC-10s.

Smaller rival Northrop Grumman said in May it's competing to win the next support contract.

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