Northrop’s Customs Auctions Probed

Northrop is under investigation by a federal grand jury in Texas for overcharging the government on an unusual contract in which the aerospace firm runs auctions of seized contraband for the U.S. Customs Service.

About once a week somewhere in the United States, Northrop auctions off aircraft, boats, cars and lesser items seized by the Customs Service from suspected drug dealers or others.

At issue is Northrop’s alleged poor performance in running the auction and complaints that the firm has charged the government and individuals exorbitant fees for storing property. The matter is also the subject of a congressional investigation.

Northrop spokesman Tony Cantafio said Monday, “We are aware of the investigation and we are working with the government to understand the details.”

Northrop is under a half dozen criminal investigations, ranging from allegations of fraudulent testing on nuclear missile guidance systems to possible illegal payments made to South Koreans in an effort to sell jet fighters.

The auction contract is held by Northrop Worldwide Aircraft Services, a subsidiary that the company has been trying to sell. The Los Angeles firm is better known for building the B-2 stealth bomber, the MX missile guidance system and a variety of jets.

In addition to the Department of Justice probe, Northrop’s contract with the Customs Service is also under investigation by the oversight subcommittee of the House Ways and Means Committee. Subcommittee Chairman Rep. Jake Pickle (D-Tex.), has alleged that lax accounting controls in customs operations has cost the federal government millions of dollars.

Last year, Northrop received about $17 million in contract payments from the Customs Service. Even though the government donates many seized items to local police agencies, the Customs auctions are operated at a net loss, according to a congressional source.

Pickle’s investigation is looking into poor performance in record-keeping and property management, according to the congressional source. It is also probing how Northrop received its contract.

Pickle is concerned that problems uncovered by his subcommittee in Texas may be symptomatic of deficiencies nationwide in disposing seized property, the source said.