Pentagon Urged to Ban Northrop as a Contractor

The Justice Department has recommended that the Pentagon bar Northrop Corp. from future defense contracts as a result of the firm’s guilty plea to criminal fraud for faking tests on a nuclear cruise missile program. Moreover, the weapon now appears to have more serious problems than previously believed.

Justice Department attorneys argued to the Air Force that the gravity of Northrop’s felonies in the case “should give rise” to a prohibition on new Pentagon business for the entire corporation. Such a penalty would mark the first time that a major defense contractor has been locked out of the Pentagon. In the past, divisions or subsidiaries of major defense contractors have been temporarily suspended, but a ban on new business--known as a debarment--can be permanent.

However, Air Force officials have argued for a relatively weak settlement that would allow the Los Angeles firm to resume normal business and bear only a minor share of the costs of the government’s investigation. A final decision on debarment is now being considered by an Air Force panel. In the meantime, the Northrop division involved in the cruise missile fraud has been under indefinite suspension for a year.

The position of Air Force officials toward Northrop appears to fit a pattern in which the Pentagon has attempted to protect Northrop from criminal liability, according to documents and testimony by several witnesses that will be introduced at a House Energy and Commerce Committee hearing today.

After allegations surfaced in 1987 that Northrop’s Western Services Department in Pomona, Calif., had been systematically falsifying tests on a guidance system for the Air Force’s air-launched cruise missile and for a stabilization system for the Marine Corps Harrier jet, the services moved to waive certain requirements that were not being met, according to Justice Department officials. Those actions undercut the Justice Department’s efforts to prosecute Northrop, according to the officials.

Although Northrop pleaded guilty in February to 34 felony counts of improper testing and paid a $17-million criminal fine, the Justice Department dismissed a part of its indictment that charged two Northrop executives with felonies. Now, Assistant U.S. Atty. William Fahey, who is chief of the public corruption and government fraud section of the Justice Department’s Los Angeles office, is arguing strongly for a debarment of Northrop.

“We are not aware of a more significant prosecution (than against Northrop),” Fahey said in an internal Justice Department memo sent in March. “This is the first time we are aware that a major defense contractor has been convicted of failing to conduct critical tests on a nuclear weapon system. If any case cries out for debarment, this is the case. If ever the American people deserve to be protected from the type of reckless and potentially life-threatening conduct, this is it.”

The issue of debarment is being considered by the Air Force Suspension and Debarment Board, a high-level panel in the Pentagon. The board was about to sign a settlement with Northrop in March when Fahey intervened and objected to the lax terms proposed by Air Force attorneys.

Northrop spokesman Tony Cantafio noted that Fahey himself had moved in court earlier this year to dismiss the charges against the two Northrop executives, Joseph Yamron and Leopold Engler, citing “the interest of justice and based upon the government’s assessment of the case.”

Cantafio added: “They dismissed the charges inside the courtroom and now they are trying to have a trial outside the courtroom--in whose interests I don’t know.”

The charges dismissed against the two executives involved allegations that Northrop knowingly used a type of damping fluid in a gyroscope for the cruise missile’s flight data transmitter that would freeze at temperatures under which it was required by contract to operate.

The contract called for the gyroscope to operate at minus 65 degrees Fahrenheit, but the damping fluid used by Northrop freezes at that temperature. An internal Northrop report dating to the early 1980s and delivered to Yamron clearly states that the fluid did not meet contractual requirements.

After the Justice Department began its investigation into the issue, however, the Air Force stepped in. It agreed to modify a test of the gyroscope’s ability to meet the cold temperature requirement so that the test conformed to Northrop’s “theory” of how it should be conducted. That “theory” limited the duration of the gyroscope’s exposure to minus 65 degrees, permitting the device to avoid freezing.

That key concession “was a severe blow” the the Justice Department investigation, according to Mark M. Richard, deputy assistant attorney general for the criminal division.

Since that decision, Northrop and the Air Force have argued that the flight data transmitter is working and that it has caused no operational problems for the cruise missile. But congressional investigators say that the Air Force has avoided failures by carefully not subjecting the missile to the low temperatures normally experienced in operations.

Moreover, an internal Justice Department memo earlier this year accused the Air Force of knowingly withholding documents that showed that the Northrop deficiencies had severely affected the cruise missile’s performance.

According to one letter from the U.S. attorney’s office in Los Angeles, the Air Force knew that the cruise missiles were failing when subjected to temperatures that commonly occur at altitudes above 30,000 feet.

Air Force officials denied that the missile has performance problems.

“The air-launched cruise missile is a reliable and fully mission-capable weapon system in which we have complete confidence,” an Air Force spokesman said Thursday. “It has been subjected to rigorous and redundant testing. The Air Force has conducted 74 air-launched cruise missile (ALCM) test missions and our data has never indicated a problem with the flight data transmitter freezing. The average test mission subjects the missile to a five-hour subzero . . . temperature test prior to launch. As far as we can determine, the alleged testing improprieties have not had an impact on the operational capability of the ALCM or any of its subcomponents.”

But the Air Force statement leaves unclear whether the cruise missiles currently meet the minus-65-degree requirement. The statement notes that the missile is subjected to subzero temperatures for five hours, but not whether those are below minus 65 Fahrenheit. In addition, the statement indicates that the missile has never failed a “test mission,” but it does not address aborted test missions or test flights themselves.

An Air Force spokesman said late Thursday that the service could not elaborate.

Investigators for Claremont, Calif., attorney Herbert Hafif, who represents former Northrop employees who brought the original cruise missile allegations under a False Claims Act suit, said that the Air Force’s own field reports of such test missions often note that tests were aborted for “inclement weather.”

“What it amounts to is that they get tested at warmer temperatures,” Hafif said. “So, then they can say the cold temperature will not affect performance. They never freeze them down to where the damping fluid really had a chance to freeze.”

The cruise missiles are deployed on the wings of B-52 bombers, which loiter for hours in flight in the Arctic at altitudes above 35,000 feet. Temperatures can easily drop below minus 65 degrees.

An investigation into the entire problem was prepared by Boeing, the cruise missile’s prime contractor. The Boeing investigation report, a copy of which was obtained by The Times, said Boeing’s concern was raised by a large number of failures of the Northrop device at Air Force depots. But Boeing concluded that the Air Force depots’ test was not proper.

Overall, the Boeing investigation found, “The demonstrated reliability of the FDT (flight data transmitter) has been found to not degrade the missile performance.”

But the Boeing study cites a failure of three flight data transmitters in 125 tests conducted up to Feb. 16, 1988, in which the missile was mounted on a wing and flown but not launched. That represents a failure rate of 2.4% for a single part of the missile, which investigators consider unacceptable because there are hundreds of such parts that can fail.

It was unclear why Boeing reported three flight data transmitters failures, but the Air Force reported none.

Hafif severely faults the Justice Department for dropping the issue, saying that the Air Force’s actions in reducing the test requirements did not absolve Northrop.

Northrop’s Cantafio said: “Those actions (falsifying tests) took place in a 30-person satellite operation in Pomona. This company acted in a responsible way by closing the plant, firing the plant manager and three other employees. We did what any responsible company would do when the matter came to our attention.”

The hearing today was called by Rep. John D. Dingell (D-Mich.), chairman of the House Energy and Commerce Committee. Pentagon and Justice Department officials, as well as a former Northrop controller, are expected to testify.