Payment Ends U.S. Complaint of Defense Overbilling

Parker Hannifin Corp., a major defense contractor with more than 1,600 employees in Orange County, has paid $7.8 million to settle a federal claim that its Irvine-based Parker Bertea Aerospace subsidiary overcharged the government on 70 contracts in the 1980s.

A Justice Department spokesman in Washington characterized the settlement as a medium-sized agreement in the government’s stepped-up effort to identify contract fraud. More than 100 such settlement agreements have been worked out in the past two years.

In a statement issued Friday, officials of Cleveland-based Parker Hannifin said that the company voluntarily reported its subsidiary’s overcharging in 1987 when it was discovered in an internal audit.

There was no fraud and the employees responsible for submitting the inflated charges were not aware “that the charging decisions they made violated government requirements or caused overpricing,” said Joseph D. Whiteman, Parker’s vice president and general counsel.

Justice officials said that Parker Bertea provided “inflated and incorrect” pricing data to government officials on defense contracts it negotiated between July, 1982, and December, 1987.

And while the company did voluntarily report and repay $2.5 million in overcharges in 1987, Assistant U.S. Atty. Gen. Frank W. Hunger said, a federal review found an undisclosed additional amount of overcharging. Parker paid an additional $5.3 million to settle the matter.

Neither the company nor the Justice Department would say whether the additional payment covered only the amount actually overcharged or whether it also included a fine.

Steve Colbert, a defense industry analyst with Prudential Securities Research in San Francisco, said that the settlement “is not going to jeopardize the company” because “defense is not all that important” to Parker Hannifin anymore. He said Parker does not have a history of defense contract problems and that the settlement “sounds like a slap on the wrist.”

Parker Bertea manufactures aircraft hydraulic and pneumatic controls and fuel systems and gets about 40% of revenue from defense work, a spokeswoman said.