Whistle-Blowers Cheated by U.S, Lawyer Charges : Contractors: A Justice Department deal with Northrop deprives two former employees a share of the settlement in missile case, their lawyer says.

The Justice Department, by cutting a secret deal with Northrop, has attempted to “cheat” two whistle-blowers who alleged that the aerospace firm falsified tests on a nuclear-armed cruise missile, an attorney in the case said Wednesday.

More broadly, the Justice Department’s behavior reflects a “private agenda” of siding against whistle-blowers and one that has “sabotaged the prosecution of cases” under the law, according to Claremont attorney Herbert Hafif.

Northrop pleaded guilty to federal criminal charges in 1990 in the cruise missile case, but the government recently negotiated a civil settlement in which the Los Angeles-based firm would fix the defective equipment at a cost of $10 million. That deal thereby deprived the whistle-blowers a share of the settlement guaranteed under a 1986 federal law, said Hafif, who represents the whistle-blowers.

In a motion filed in federal court late Wednesday, Hafif alleges that Justice Department attorneys “lied,” “stole” and engaged in a conspiracy of “deceit” against the two whistle-blowers, Leocadio Barajas and Patricia Meyer, who sued Northrop in 1987 under the False Claims Act.

The 31-page motion seeks a public hearing on the allegations, which are based on the general presumption that the Justice Department is trying to protect the interests of the Defense Department and other federal agencies rather than aggressively prosecuting contractors.

The Justice Department denied that it has cheated any whistle-blowers. Northrop declined comment.

Under the False Claims Act, individuals can sue private corporations on behalf of the government and share in any damages. That entitles whistle-blowers to receive 15% to 25% of the recovery, but in practice they have received less than 15%.

Several other attorneys around the nation who have pressed cases under the False Claims Act concurred in interviews that the Justice Department has been weak in its prosecution and created hostile relationships with whistle-blowers.

Robert Carmody, a Washington civil attorney, said the Justice Department assigned “the lowest priority it could” to a False Claims Act case he brought against US Sprint, and Justice attorneys blocked his access to tape-recorded evidence that his own client provided. James Haygood, a Denver attorney, alleged that the Justice Department has “used every trick in the book” to obstruct his $300-million whistle-blower case against the Sonoma County Water Agency, including arguing unsuccessfully to have his charges dismissed.

All the attorneys, along with others who spoke anonymously, said the Justice Department has agreed to settle cases on the cheap and has sought to excuse fraudulent behavior at private contractors on the theory that it was condoned by high-level government officials. Carmody said the department “does not want to rock the boat when it comes to major government contractors.”

The Justice Department has not aggressively pursued the allegations brought by whistle-blowers because the agency, on technical grounds, never fully supported the 1986 amendments to the False Claims Act that empowered individuals, the attorneys say.

Another problem has been friction between private and government attorneys on how to pursue cases. And finally, private attorneys question whether the Justice Department is seeking to protect the relationships of federal agencies and their contractors from aggressive prosecution.

A Justice Department attorney in Washington denied Hafif’s allegations that any secret deal had been cut in the cruise missile case.

The attorney said, “Obviously, we deny that we are trying to cheat any whistle-blowers.”

He declined to answer detailed questions about the case, but he said the law does not prevent the government from resolving contractual disputes that do not involve fraud.

He said the government has not sought to excuse fraudulent acts when government officials condoned them, but he said such cases are often considered weak when presented to juries or judges, despite the views of plaintiff’s attorneys.

Northrop spokesman Tony Cantafio said: “I can’t comment on any dispute between Mr. Hafif and the Justice Department.”

Congressional sources said the private attorneys have valid complaints about the Justice Department’s handling of the cases, though many of them would be dissatisfied with any settlement short of a big award by a jury.

A staff member of the House Energy and Commerce Committee expressed concern that the Justice Department has been so weak that future whistle-blowers might be reluctant to come forward.

The False Claims Act dates to the Civil War but was amended in 1986 to significantly improve the ability of whistle-blowers to bring fraud allegations. Since those amendments, more than $70 million has been recovered. The Justice Department official said $7 million to $10 million has been paid out to whistle-blowers, far below the 15% lower limit set in the False Claims Act.

The Justice official said the payout is below 15% because many whistle-blowers are not entitled to anything since their allegations involved breaches of contract rather than fraud.

In the Northrop case, the Justice Department joined a suit filed by Barajas and Meyer, but amended the case. The Justice Department kept allegations that Northrop falsified testing on a guidance device called a flight data transmitter but decided to throw out allegations that Northrop knowingly supplied gyroscopes for the device that contained a fluid that would freeze at temperatures required under the contract.

After a lengthy court battle, Hafif filed a separate suit on those allegations with the intention of pursuing the case privately.

Meanwhile, the Air Force and Northrop conducted negotiations outside the case to determine how the cruise missiles would be fixed. Northrop agreed to replace either the gyroscopes or the fluid and bear the estimated $10-million cost of the repairs, an Air Force spokesman said last week.

NORTHROP LAYOFFS

Northrop, which lost the bidding for an advanced tactical fighter, will eliminate another 1,000 jobs by year’s end. D2