Defense contractor, Northrop Grumman pays $325 million to settle qui tam suit
Defense Contractor Northrop Grumman Corp., has agreed to settle False Claims Act allegations for $325 million, according to the Department of Justice. Allegedly, Northrop provided and billed the National Reconnaissance Office (NRO) for defective microelectronic parts, known as Heterojunction Bipolar Transistors (HBTs).
Investigation into the HBT Action found that that Northrop and TRW failed to properly test and qualify certain HBTs manufactured by TRW from 1992 to 2002. As a result, Northrop and TRW integrated into NRO satellite equipment certain defective HBTs. The investigation further concluded that Northrop and TRW made false misrepresentations and concealed key material facts regarding the reliability of the HBTs.
U.S. Attorney for the Central District of California Thomas O’Brien and Acting Assistant Attorney General for the Civil Division Michael F. Hertz announced the settlement.
According to Acting Assistant Attorney General for the Justice Department’s Civil Division Michael F. Hertz, “The settlement of the HBT case demonstrates that the Department of Justice will investigate even the most complex and challenging allegations. The settlement demonstrates that defense contractors will be held accountable and that the government will aggressively pursue all allegations of misconduct in the procurement process.”
Kudo's to relator and whistleblower Robert Ferro, Ph.D., an employee of The Aerospace Corporation for coming forward with this case. Although, the case was filed filed in US. District Court in the Central District of California in 2002, the government intervened in the lawsuit against Northrop in November 2008. Dr. Ferro will receive $48.75 million as his relator's share of the recovery in the HBT action under the qui tam provisions of the False Claims Act.
In a qui tam suit, the whistleblower also known as a "relator" may be entitled to 15-30% of the government's total recovery, which includes damages for the false bills, tripled, plus civil penalties of from $5,000 to $10,000 per false claim. However, it is important to mention, that the relator/whistleblower must have complied with the statutory requirements to be eligible for the whistleblower reward.
Northrop Grumman stock closed today at $47.94. According to published 4Q reports, Northrop Grumman Sales in the 4Q increased by 4 Percent to a Record $9.2 Billion. Overall in 2008, Sales increased 6 Percent to a Record $33.9 Billion. It is easy to see why they finally agreed to end the fight, admit no wrongs and settle the qui tam suit for $325 million. Hopefully, this large fine will deter other Defense Contractors from misrepresentations of products sold to the Government in the future.
