A Grand Junction-based defense contractor has agreed to pay more than $1 million to resolve allegations it defrauded the Army in supplying grenade launchers that didn’t meet contract specifications, a United States attorney announced.

Capco agreed to pay $1,025,429. While entering into the settlement, the company didn’t admit to any liability or wrongdoing.

“We entrust our defense contractors to manufacture equipment of the highest quality for the men and women who serve our country in the U.S. armed forces. Any breakdown in the production process must be swiftly and honestly addressed, and we will hold contractors fully responsible for fraudulently covering up production problems,” said Jason Dunn, U.S. attorney for the District of Colorado.

According to the allegations, Capco knowingly shipped grenade launchers with barrels that didn’t meet contract specifications. The company also used the wrong steel in manufacturing firing pins for the launchers. The matter involved shipments made between July 2016 and March 2018.

According to the allegations, Capco certified shipments despite knowing the barrels didn’t meet specifications. Capco conducted an internal investigation into the potential use of the wrong steel for the firing pins. But the investigation was inadequate, and the company didn’t disclose the matter to the Army.

The United States concluded this conduct gave rise to civil liability under the False Claims Act.

James Cole, who formerly worked as a quality engineer at Capco, filed a lawsuit under the False Claims Act. Under that law, private citizens can present allegations to the government by bringing a lawsuit on behalf of the United States under seal. If an investigation substantiates the allegations and the government obtains a monetary recovery, the citizen may share in that recovery. Cole will receive about $235,000 from the recovery.

The Army Criminal Investigation Command and Defense Criminal Investigative Service worked on the investigation.

Cordell Bennigson, chief executive officer of Capco, said in a statement the company cooperated with the government in the investigation and there was no reason to believe the concerns alleged in the lawsuit affected the grenade launchers or the safety of their use.

“As a company, this chapter has made us smarter and stronger,” Bennigson said. “The safety and effectiveness of our products, which are used by the men and women who serve us all in the military and law enforcement, always has been and always will be Capco’s highest priority. Today, Capco’s quality and compliance systems are stronger than ever.”

The settlement comes as Capco moves into full-scale production on other products, including bomb fin assemblies for the United States military and foreign allies. The company recently purchased a 35,000-square-foot building on South 12th Street and invested more than $5 million in the building and manufacturing facilities there.

Capco was awarded a nearly $34.3 million contract to supply the fin assemblies. The company also received a nearly $40 million contract for impulse cartridges used to eject flares and chaff from aircraft and an almost $39 million contract for lightweight machine gun tripods. Capco has supplied the cartridges since 2002 and tripods since 2013.

Capco employs more than 375 people at its facilities.

“We know that the government has confidence in our people, our quality and our ability to deliver an excellent product, and we are proud to serve our nation’s military and law enforcement professionals every day,” Bennigson said.