Ex-Staffer, McDonnell Settle; Details Secret

A former employee of McDonnell Douglas’ helicopter manufacturing unit Wednesday settled a civil fraud suit that had accused the company of overcharging the Army $175 million on the Apache helicopter program, but his lawyers refused to reveal the terms of the agreement.

U.S. District Judge William D. Keller approved the settlement and a confidentiality agreement providing that its details will be kept secret. Keller said the secrecy pact was “part of the bargain” that led up to the settlement and “I’m prepared to honor it.”

Justice Backed Out

In late July, former employee Rod Stillwell told The Times that McDonnell Douglas had agreed to pay him nearly $500,000 to settle the case and that all major issues had been resolved. On Wednesday, Stillwell was not available for comment. His lawyers, William R. Ramsey and Louis J. Cohen, said they could not comment, as did Robert Scoular, McDonnell Douglas’ lawyer.

The suit was filed under provisions of the False Claims Act that allow a private person to file a suit on behalf of the government. If there is recovery of damages in the case, the person gets up to 30% of the money. The rest goes to the U.S. Treasury.

Stillwell’s suit was filed in 1987. The Justice Department at one point joined the lawsuit, then bowed out, saying there was no evidence that the government had been damaged. In such circumstances, the statute allows the private plaintiff to proceed with the case.

The lawyers for both sides issued a joint statement after a brief court hearing Wednesday afternoon. It said, in part:

“After conducting an extensive investigation, the Department of Justice withdrew from the case, concluding that there was insufficient evidence that the alleged acts of the defendants resulted in any damage or injury to the United States. Consequently, no monies were paid by McDonnell Douglas Helicopter Co., Hughes Helicopters Inc. or Parker Hannifin Corp. (the other defendants) for, or in respect of, damages or any other amounts claimed or which might have been claimed on behalf of the United States.”

Other knowledgeable sources said the language in the statement does not mean that Stillwell might not have received a monetary settlement.

Later in the day, Cohen would add only that “the litigation has been settled and dismissed to the satisfaction of all parties.”

Consented to Settlement

Since the suit was filed under the False Claims Act, the Justice Department had to approve the settlement. Judge Keller initially indicated that papers filed by McDonnell Douglas concerning the government’s approval of the settlement were not specific enough. So, he had Scoular, McDonnell Douglas’ lawyer, place a call to Justice Department lawyer Stephen Altman in Washington and the judge spoke to him over a speaker phone.

Altman confirmed that the Justice Department had consented to the settlement. Keller asked him if the department’s reason for agreeing was that “irrespective of any misfeasance, there had been no damage to the government.” Altman answered yes.

Scoular said the company’s negotiations with the government had been conducted in confidence and asked that the settlement with the government be kept confidential, too. Altman said the government had not made a confidentiality agreement with McDonnell Douglas.

Amy Brown, a Justice Department spokeswoman, said Wednesday evening that McDonnell Douglas, the prime contractor on the helicopter, and Parker Hannifin, the subcontractor, each agreed to reimburse the Army $14,000 for investigative costs incurred in connection with the case. She said the two companies also agreed that they would not pass on to the government “in the form of future overhead” any costs they incurred during the case.

In addition, Brown said, the two companies told the government that they each had incurred $115,000 in in-house costs in litigating the case. McDonnell Douglas told the Justice Department it had incurred $1.3 million in outside expenses, including legal fees in the case, she said, adding that Parker Hannifin said its outside costs had been $337,000.

Earlier this year, McDonnell Douglas attempted to have the suit thrown out of court on grounds that the law under which it was brought was unconstitutional. But Judge Keller rejected that argument in June, and a federal appeals court on July 31 declined the company’s petition to review the case.

Knowledgeable legal sources said they believed that this was the first settlement of a False Claims Act suit that had not been made public.