Northrop in More Trouble in Dispute Over MX Testing Device

Northrop is under federal investigation for having built a $1.2-million machine to test a key component of the MX missile guidance system and for billing the government for the expense even though the Air Force had not given prior authorization for the equipment, congressional sources said Friday.

The allegations are the focus of both criminal and civil investigations being conducted by the Justice Department in connection with a broader probe of Northrop’s activities in the MX missile guidance program, the sources said.

Northrop sought approval from the Air Force to build the machine in September, 1985, well after it had completed and begun to use it, according to documents obtained by The Times. Northrop billed the government for the machine before the authorization was sought, sources said.

Northrop spokesman Tony Cantafio declined to comment on the investigation but said the company was “authorized to build (the machine) under our contracts, and the equipment was built with government knowledge.”

The machine, known as a dry integration test station, was intended to assess all parts of the guidance system component before it was fully assembled. The guidance device, called an inertial measurement unit, is the size of a basketball and is designed to float in a special fluid.

Northrop was supposed to be using a more advanced test machine that would evaluate the guidance device as it floated in a test tank. But the firm had fallen so far behind schedule in the development of the guidance system that engineers felt they needed to build the dry integration test station to get the program moving faster, the sources said.

The allegations under the criminal investigation are also part of a civil fraud suit in which two former Northrop employees have alleged that the company used fictitious companies to buy missile parts from unauthorized vendors.

The employees who brought the civil case, Jeff Kroll and Dave Peterson, testified in congressional hearings in 1987 that Northrop had established a number of fictitious businesses to buy parts for the MX missile. Northrop turned to the fictitious businesses when its Pentagon-approved purchasing system fell behind schedule and could not supply badly needed parts, according to testimony.

The contract for the guidance system of the missile, which carries 10 nuclear warheads, requires exact traceability of parts, and purchases of parts must be made only from government-approved firms.

Indictments Expected Soon

The Justice Department agreed Sept. 1 to join the civil case, according to Herbert Hafif, a Claremont attorney who is handling a number of cases against Northrop.

Hafif said he could not comment directly on the criminal case, but he issued a statement that said the criminal investigation corroborates the civil probe conducted by his firm. Phillip E. Benson, an attorney at the Hafif office, said the Justice Department is seeking to keep the civil case under court seal. The case was bought under the federal False Claims Act, which allows individuals to sue on behalf of the government and permits the government to join such cases.

Rep. John D. Dingell (D-Mich.), chairman of the House Energy and Commerce Committee, has been conducting a broad probe of Northrop’s problems in the MX and B-2 bomber programs.

Northrop and some of its executives could be indicted in the MX guidance system case within as little as one month, congressional sources and Northrop employees said.

“It seems like they are preparing employees for an indictment,” a Northrop employee said. “In the staff meetings throughout the company, they are telling us that we are going to hear about some indictments, but not to worry about it. They say it is just going to be a nuisance suit because the government has to have something for all the time it spent on this suit.”

Northrop and two executives were indicted earlier this year on criminal fraud charges alleging that the company improperly tested the guidance system for a nuclear-armed cruise missile, which was built by a Northrop division not involved in the MX program.

The company had also been charged with civil fraud on the MX program, but the Justice Department dropped those charges recently after it agreed to a settlement with Northrop that provided for monetary restitution to the government.