Hughes Begins Refunds to U.S. of $8 Million : Firm Cites Medical Claims Fraud Case

Hughes Aircraft said Thursday that it will begin reimbursing the Defense Department for an estimated $8 million in fraudulent medical claims that the company billed to the government as a result of a $12-million embezzlement by a Hughes employee last year.

A Hughes spokesman said the company will make an initial payment of $6 million this week, with the balance to be paid “as soon as more detailed analysis is completed, and when we have the exact amount, we will reimburse government with interest.”

Last September, Shirley Davis, a longtime employee in Hughes’ medical-claims department, pleaded guilty to embezzling $12 million from the company’s medical plan and diverting it to the bank account of an Anaheim record company owned by her husband, Clyde L. Davis. The Davises subsequently were each sentenced to 10 years in prison.

Before it discovered the embezzlement scheme last August, Hughes passed along the cost of the fraudulent claims under the terms of its contract with the Defense Department.

A Hughes spokesman said Thursday that the company’s decision to begin reimbursing the government for the fraudulent claims was not brought on by a letter sent by Rep. Mel Levine (D-Santa Monica) to Defense Secretary Caspar W. Weinberger last week asking for a status report on the Hughes matter.

A Hughes spokesman said there was never any question that the company would repay the government.