Teledyne, Official Accused of Fraud; Settlement Offered

Federal prosecutors filed criminal charges Friday against Teledyne Industries Inc. and one of its executives, accusing the Los Angeles-based defense contractor of making false statements about test results on sensitive electronic equipment that is widely used by the military.

A Teledyne spokesman immediately said that the company had agreed to pay the maximum of $17.5 million in fines to settle the criminal case, in which it is accused of 35 counts of submitting false statements between 1987 and 1990.

In addition, the federal criminal “information” filed in U.S. District Court charges Thomas L. McDowell, vice president of the Teledyne Relays Division in Hawthorne, on two counts of making false statements in 1987.

Teledyne is accused of systematically falsifying tests it was required to perform to ensure the reliability of electromagnetic relays--a type of electronic switch--used in an array of weapons systems, including the Patriot missile.

The charges, which had been expected for several months, were announced in a statement released on behalf of U.S. Atty. Terree A. Bowers late Friday afternoon.

Teledyne spokesman Berkley Baker said Friday evening that the firm had agreed to settle the case by paying $500,000 for each of the 35 counts. “We think it’s embarrassing, costly and contrary to the corporation’s code of ethics,” Baker said of the company’s alleged misconduct.

One of the federal prosecutors handling the case, Julie Fox Blackshaw, would neither confirm nor deny that there had been a settlement. The earlier statement by the U.S. attorney’s office said only that Teledyne is scheduled to appear for arraignment Monday before U.S. Magistrate Robert M. Stone and that McDowell is to be arraigned Oct. 19.

It was not immediately clear how a settlement with Teledyne might affect the government’s case against McDowell, who faces up to five years in prison and a $250,000 fine on each count.

The federal government and its contractors have purchased more than 200,000 relays a month from Teledyne for use in the space shuttle, satellite launching devices and many major weapons programs.

Teledyne was named last year in a $250-million civil lawsuit filed by two of its employees in the nation’s biggest whistle-blower case.

That suit alleged that Teledyne’s Hawthorne facility sold commercial-grade electronic relay devices to the armed services but certified them as having met more rigorous military standards.

The Hawthorne division was raided last year by federal agents after the civil suit was filed. The alleged infractions occurred between 1983 and 1990, a period during which Teledyne reportedly shipped 9 million suspect relay devices, according to a staff member of the House Energy and Commerce Committee.

A subsequent federal investigation found that many of the devices failed to meet military standards. As a result, Teledyne was decertified as a supplier for the most sophisticated relays.

The investigation found that the firm charged the military $15 for relays that were in fact worth $6.20 because they were never tested.

The civil suit was filed under the federal False Claims Act that permits any person having knowledge of fraud against the government to file suit on behalf of the government and to share in any monetary recovery. The two individual plaintiffs were Almon Muehlhausen II of Torrance, the test lab manager for Teledyne Relays, and Emil Stache of Alta Loma, former manager of quality engineering and reliability at the unit.

The Department of Justice later gave its backing to the False Claims Act case.

Stache has also filed a separate lawsuit in Los Angeles Superior Court alleging that he was illegally fired in 1990 because he refused to falsify test results. He alleged that shortly after he was hired as a quality control manager in 1983 he “discovered that the machines on which Teledyne was ostensibly conducting” quality tests were “not even turned on in a manner that would indicate if a relay had failed the testing.”

Afterward, Stache conducted legitimate tests that revealed failures of the parts, but was told by his superiors to destroy the records, the suit says.

Times staff writer Tom Petruno contributed to this story.