Judge Drops ‘Whistle-Blower’ Lawsuit Against Hughes : Aerospace: The defense contractor settled with a former engineer who accused it of installing defective weapons parts.

A federal judge has dismissed a $9.6-billion “whistle-blower” lawsuit filed by a former Hughes Aircraft Co. engineer in Fullerton who accused the defense contractor of installing defective microchips in several weapons systems.

The suit, filed by former engineer Michael C. Denlinger in June, 1989, was dismissed Dec. 5 in U.S. District Court in Santa Ana at the request of Hughes and with the consent of Denlinger. Hughes announced the dismissal Wednesday.

“There was a settlement, but I can’t disclose the terms,” said William Humphreys, an attorney for Denlinger. “It was not dismissed on the merits of the case. It was impossible for my client to continue.”

Humphreys said his client believes that the suit has merit but decided to drop it because of the emotional and financial strain of the legal battle. Humphreys said Denlinger is unemployed and had accumulated more than $30,000 in legal bills.

Richard Dore, a Hughes spokesman, said that the Denlinger suit was “frivolous” and that the problem “had been resolved to the point that even our customers recognized it.” Dore said the agreement to dismiss the case did not involve a cash settlement.

Denlinger had filed the suit under the federal False Claims Act, accusing Hughes of covering up flaws in more than 4 million microchips installed in defense systems since 1984. The suit claimed damages of $3.2 billion, an amount that under federal law could have been trebled.

After a nine-month investigation, the Justice Department in February declined to join in the suit against Hughes. Denlinger then pursued the lawsuit on his own. The suit was dismissed on a procedural matter in April and refiled in June.

In November, Hughes filed a motion to dismiss the case, citing evidence that the problem claimed by Denlinger was solved with the cooperation of the Department of Defense and other companies years before the suit was filed, Dore said.

Hughes officials said the company and its suppliers discovered in 1985 that a part known as a dual in-line package integrated circuit would sometimes crack when subjected to certain manufacturing processes.

The company said it then corrected the manufacturing problem and inspected all inventories to remove any potentially defective circuits. Hughes provided extended warranties on its equipment sold to the government, Dore said.

Denlinger had claimed that the defective microchips had been used in a variety of weapons systems, including Navy submarine torpedoes and shipboard electronics systems. Humphreys contended Wednesday that some faulty chips manufactured before 1985 are still being used in U.S. military equipment.