U.S. Files Fraud Lawsuit Against Northrop Corp. : Justice Dept. Is Seeking to Recover $3 Million for ‘Fictitious’ MX Tests
The federal government sued Northrop for fraud in U.S. District Court in Los Angeles on Tuesday, alleging that the defense contractor charged the Pentagon for tests that were never conducted on MX missile guidance devices.
The federal civil suit, brought under the False Claims Act, seeks recovery of more than $3 million for labor and equipment charges paid to Northrop Corp. on the “fictitious” tests at its electronics division in Hawthorne.
In addition to the Justice Department action Tuesday, Northrop remains under investigation by two congressional committees and a grand jury in Los Angeles. A spokeswoman for U.S. Atty. Robert C. Bonner said she could not comment on the status of the criminal investigation.
Because of its late deliveries of MX equipment, Northrop is under a contract payment suspension in which the Air Force is withholding $108 million on the MX program. The company’s late deliveries have left one-third of the nation’s MX nuclear missiles without guidance devices.
Northrop is the prime contractor for the MX’s inertial measurement unit, a basketball-sized device that contains 19,401 parts and floats in a fluid-filled chamber in the missile. At issue is a part called a heat exchanger, which is supposed to cool the electronics and instruments inside the IMU.
The Justice Department suit alleges that Northrop certified that the heat exchanger could withstand a pressure of 150 pounds per square inch, but the company never performed the test. The suit claims that Northrop did not even own the equipment to perform the test.
Discovery After Explosion
The suit charges that Northrop “submitted documents to the Air Force certifying that the heat exchanger had been pressure tested and had met all of the test requirements set forth in the contract specifications with the Air Force.”
The Air Force learned that Northrop was falsifying the tests when one of the heat exchangers exploded during a test in 1986, according to a Justice Department statement issued Tuesday. In investigating the incident, the complaint says, the Air Force determined that Northrop had not properly tested 20 of the heat exchangers.
The explosion incident occurred when an Air Force inspector requested to witness a heat exchanger pressure test as part of his duties at Northrop, according to testimony by Col. Thomas Speed, the Air Force manager for the MX program, before the House Armed Services Committee in June. Congression sources said the IMU shot up to the ceiling in the explosion and one individual was injured.
According to a report issued Monday by the House Armed Services Committee, the Air Force Office of Special Investigations began a probe into the incident in March, 1986, amid allegations that 77 of the heat exchangers were falsely certified.
In a related action Tuesday, the Justice Department said it was moving to dismiss part of a lawsuit against Northrop brought last October by former Northrop engineer Brian Hyatt.
The Hyatt suit also made allegations about the heat exchanger under the False Claims Act. Under that law, the federal government has the option of taking over a suit filed on its behalf by an individual.
But the Justice Department said it was seeking to dismiss the Hyatt case, because it already knew about the allegations when Hyatt filled his case. The dismissal motion, if successful, would exclude Hyatt from sharing 25% of the recovery, which is provided for under the False Claims Act.
Amy Brown, a Justice Department spokeswoman, said the Justice Department was seeking to dismiss other allegations made by Hyatt, regarding the use of contaminated and defective components in the missile. A statement said that the government investigated those allegations and did not find “a basis to pursue the charges further.”
Hyatt’s attorney, Herbert Hafif, who is representing half a dozen Northrop employees, reacted with outrage to the motion to dismiss. Hafif said he had cooperated closely with the FBI, the Air Force and the Justice Department in the case.
“The Reagan Adminsitration has once again shown its contempt for the American people,” Hafif said. “Next week we will present . . . evidence that shows multiple failures of these missile systems, failures which have been covered up by Northrop and the Air Force, and subsequently ignored by or hidden from the Justice Department.”
A Northrop spokesman said he had not seen the lawsuit and could not comment on it. But the spokesman said that all of the heat exchangers have now been tested.
In testimony on June 18, Northrop Group Vice President David N. Ferguson told the House Armed Services Committee that the company acknowledged that the heat exchanger tests were never performed.
In its request for damages, the Justice Department asks for treble damages on $1 million, in addition to civil penalties and the costs of the suit. Its request for damage also outlines several alternative damage requests, which all start at $1 million.
