Hughes Will Pay Fine to Settle Fraud Allegations : Contracts: Aircraft company is assessed $3.9 million but does not admit to the government’s charges that the Navy was improperly billed for radars manufactured during the 1980s.

Hughes Aircraft Co. will pay a $3.9-million fine to settle allegations that it defrauded the government on several contracts to build shipboard air defense radars for the Navy during the 1980s, the Justice Department announced Tuesday.

The government had alleged that various Hughes managers schemed to shift charges the company incurred in building air defense radars for the German government to a Navy contract to build SPS-52 radars, the Justice Department said in a statement.

SPS-52 radars are a mainstay of shipboard air defense radars for destroyers and frigates, which are smaller escort ships in the Navy fleet.

A spokesman for the Hughes Ground Systems Group subsidiary, which has been renamed Hughes Fullerton, would not comment on the settlement except to note that the managers involved in the scheme no longer work at Hughes.

Under the agreement, which was signed on Monday, Hughes did not admit guilt or claim innocence regarding violations of federal laws. The investigation began in June, 1989, when Hughes notified the Department of Defense of improper billing. No criminal or civil charges were filed.

The first instance of alleged mischarging took place between May and December, 1980. Hughes Ground Systems managers allegedly shifted $1.45 million in costs from the German contract to the Navy radar contract for the fiscal years 1978 and 1979.

The Navy pact was a fixed-price contract under which Hughes agreed to produce radars for the Navy for a specific amount of money. If the actual cost of the radars was lower than the agreed price, then Hughes would pocket the difference as profit. Such fixed-price contracts were aimed at giving contractors an incentive to reduce costs.

Since Hughes overran the target cost on the Navy radar program by more than the $1.45-million amount, the mischarging did not result in higher costs for the government on that program. But one result of the mischarging was that the government made payments to Hughes on the contract earlier than required. The interest on the early payments amounts to $418,325.

Another effect of the mischarging began in March, 1989, when, at Hughes’ request, the government agreed to renegotiate the target cost of the Navy radar contract for fiscal years 1978 and 1979.

The historic labor and material costs that Hughes used to establish a renegotiated target cost included the mischarged German contract costs. As a result, the Navy renegotiated a contract that was inflated by $1.41 million, the Justice Department maintained.

Hughes also mischarged the Navy by $299,385 when it negotiated the price for the 1982 fiscal year contract for Navy radars. Although Hughes disclosed all the charges, it is liable to the government under the federal False Claims Act, which entitles the government to recover damages plus penalties.