U.S. Joins Employees’ Suit on Northrop MX Charges

The Justice Department has intervened in a civil fraud suit against Northrop Corp. that alleges overcharges on MX missile equipment, according to federal sources and private attorneys.

U.S. District Judge David V. Kenyon issued an order late Thursday unsealing the Justice Department’s amended complaint in the lawsuit, originally filed two years ago.

Due to a variety of bureaucratic snafus, the Justice Department complaint was not available Friday, but reliable sources said the department had intervened in the case on three issues: The department is alleging that there was some overcharges on MX contracts, improper use of unauthorized testing equipment and unapproved use of subcontractors.

The Justice Department complaint against the Los Angeles aerospace company is less extensive than the original suit brought under the federal False Claims Act by two former Northrop employees, David Peterson and Jeff Kroll.

In June, 1987, Peterson testified before Congress that Northrop instituted several shell companies to circumvent its normally labyrinthine procurement system and speed the MX project. Northrop has acknowledged setting up a separate company to buy parts but has contended its actions fell within Pentagon guidelines.

Herbert Hafif, a Claremont attorney representing Peterson and Kroll, said the Justice Department’s decision to intervene means that Northrop has “a very serious problem.”

Northrop spokesman Greg Waskul declined to comment on the Justice Department complaint, saying that the company had not been served yet. However, he said that the suit doesn’t “deal with an issue of quality” of the company’s work on the MX.

“The reliability and accuracy of the parts made for the MX by Northrop continue to be better than planned, as has been the case throughout the program,” he said.

The Times reported on Sept. 9 that congressional sources said Northrop is under federal investigation for building 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. The charges reportedly are the focus of criminal and civil investigations being conducted by Justice Department officials in connection with a broader probe of Northrop’s activities in the MX missile guidance program.

The machine in question, called a dry integration test station, is intended to assess all parts of the guidance system component before it is 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.

Justice Department lawyers tried to persuade Judge Kenyon to keep the civil suit under seal until the criminal probe has been completed, but they were unsuccessful, according to sources close to the case. However, Kenyon’s order unsealing the case prohibits any discovery proceedings by lawyers on the dry integration station for 60 days.

Under the False Claims Act, the Justice Department has 60 days to tell a federal district court whether it wants to join in litigation brought by whistle-blowers, such as Peterson and Kroll. In some instances, the department can gain an extension, and it got a lengthy one in this case. The whistle-blower can garner between 15% and 25% of any damages recovered in a suit of this kind if the Justice Department intervenes.