Teledyne Agrees to $5.56-Million Settlement of Fraud Claims : Newbury Park: In agreeing to pay, the company denies whistle-blower’s charge that it falsified tests on electronic ID systems for military aircraft.

Teledyne Inc. has agreed to pay $5.56 million to settle federal civil claims that its electronics division in Newbury Park falsified tests on electronic identification systems for military aircraft, the Justice Department announced Thursday.

The settlement, the second involving alleged fraud at the Newbury Park facility, resolves allegations of improperly testing “identification friend or foe” (IFF) systems on Navy and Air Force aircraft.

Thursday, Teledyne denied the allegations initially raised by a whistle-blower and said it settled the case because of “the costs and uncertainties of litigation.”

The identification systems, produced by Teledyne and other defense contractors, are used on virtually all military aircraft to identify non-hostile aircraft and thus avoid casualties from friendly fire.

*

The importance of such inter-aircraft signaling became apparent in the downing of two Army helicopters by U.S. fighters in the “no-fly” zone over northern Iraq in April.

Although Pentagon investigators blamed the loss of 26 lives mostly on human error, their report said two helicopters failed to transmit proper coded signals identifying them as American. Investigators have been unable to determine why the devises apparently malfunctioned.

In the Teledyne case settled Thursday, the government did not allege that any of the identification systems have failed to work. Nor does the settlement include any recall of equipment.

But Justice Department officials accused Teledyne of failing to perform some tests and manipulating testing data. And, they said Teledyne has agreed to inspect all of the identification systems that the company has sold to the Air Force.

*

Thursday’s agreement settles a lawsuit filed two years ago by a whistle-blower under the False Claims Act. The act allows private citizens to file suit on behalf of the federal government and receive a portion of the damages if legal action is successful.

Stephen Reddy, a former senior program manager at Teledyne’s Electronic Division, will receive $869,000 as part of the settlement, Justice Department officials said.

Reddy, who was fired after pointing out testing problems to his superiors, said he was pleased with the outcome of the case. “I think Teledyne has learned its lesson,” he said. “Justice has been done.”

Reddy’s attorney, Phillip Benson, called the settlement a great success. “These whistle-blowers take an enormous risk going up against a major corporation,” Benson said. “When you see a case like this, it is very uplifting.”

In his lawsuit, Reddy alleged that Teledyne failed to properly test the identification systems used on Navy E2C Hawkeye surveillance planes and on various jet fighters used by the Air Force and sold to Egypt.

Specifically, Reddy alleged that Teledyne failed to test components of the IFF systems accurately and manipulated the testing and calibration of units to meet acceptable standards.

The lawsuit also alleged that Teledyne improperly charged the U.S. government for idle time of its employees and for work performed on IFF systems for jet fighters bound for Egypt.

The settlement covers a series of contracts totaling $74.1 million, officials said.

*

Justice Department officials said these allegations were substantiated during a two-year investigation by the Ventura County office of the FBI, the Air Force Office of Special Investigations and the Naval Investigative Service.

Frank Hunger, head of the Justice Department’s civil division, applauded the resolution of the case. “We are especially proud of the efforts of the investigating agencies in this matter who spent countless hours on this case,” he said.

The settlement is the latest in a series from Teledyne involving allegations of fraud in defense contracts with its various facilities in Southern California.

Last year, Teledyne agreed to settle another case involving allegations of improper testing at its Newbury Park plant of IFF systems on surface-to-air Stinger missiles used by the Army. The company said it would pay the $5-million fine and spent at least $5 million to recall and repair 5,900 missiles.

Federal officials declined to say if they were pursuing other allegations against Teledyne’s Newbury Park facility, which is being sold to Litton Industries Inc. of Beverly Hills.