U.S. Agents Raid Litton in Probe of Billing Practices

Federal agents seized thousands of records from the headquarters of defense contractor Litton Industries Inc. on Wednesday as part of a criminal investigation into allegations of fraudulent billing on government contracts, authorities said.

About 40 investigators from the Defense Criminal Investigative Service, FBI and Air Force descended on the Canoga Avenue complex in Woodland Hills at about 8 a.m. and hauled away a decade’s worth of documents related to billing by the company’s guidance and control division--the unit that produces specialized navigation equipment used in military planes and ships.

“This is a real sensitive case we have right now,” said DCIS spokesman Al White, who declined to comment on specifics of the raid. “I can say we are executing a warrant and conducting a criminal investigation.”

Agents reportedly sealed off Building 32 on the company’s parklike grounds just north of the Ventura Freeway. A Litton employee said workers were frightened and not “really sure what was going on.” Executives made announcements at frequent intervals to calm employees.

A senior federal law enforcement official said the investigation is attempting to determine whether Litton engaged in a practice of improper billing, based on evidence that the firm had inflated prices on certain contracts.

“We are trying to determine whether there is a broad practice that crosses lines of business,” said the official, who asked not to be identified.

The investigation is believed to have been set off last year when a still anonymous whistle-blower filed a sealed lawsuit under the federal False Claims Act, which allows individuals to sue a contractor on behalf of the government and share in any damages that are won.

The suit, filed in federal court in Los Angeles, is believed to allege that Litton executives arbitrarily inflated contract bids for defense work, according to an official knowledgeable about the case. The practice of inflating bids is not allowed under federal acquisition regulations because all bids are supposed to be supported by actual cost data.

Litton spokesman Robert Knapp said he was unsure what agents wanted but acknowledged that their efforts were focused on billing records. “You have to assume it has to do with pricing or contracts,” Knapp said. “That’s usually what it is.”

Litton’s guidance and control division is one of the largest units in the company’s electronics group, which accounted for more than half the company’s $3.32 billion in revenue in its fiscal year ended July 31. Its other major business segment is military shipbuilding.

The division makes navigation systems used in virtually every type of military aircraft, as well as in ships, land vehicles and missiles. Its newest guidance systems, for instance, combine laser gyros and star-tracking technologies to allow missiles to fly with extremely high accuracy for thousands of miles.

Knapp said this is the first time he’s aware of that the guidance and control division has been the subject of a federal investigation.

In one of the largest whistle-blower settlements in history, Litton agreed in July 1994 to pay $82 million to resolve allegations that it overcharged the government for computer work on defense contracts. That case also was filed under the federal False Claims Act, by a former Litton data systems analyst who alleged the company used illegal accounting techniques to charge the Pentagon for data-processing costs that should have been borne by commercial customers.

Moreover, a former Teledyne Inc. electronics division was the subject of a massive government investigation before the unit was acquired by Litton in January 1995. The inquiry, initiated after an employee alleged fraud in the testing of electronic gadgets that enable U.S. soldiers to distinguish friendly from enemy aircraft, spawned several lawsuits and millions of dollars in settlements paid by Teledyne.

In January 1994, Litton pleaded guilty to federal fraud charges and agreed to pay $3.9 million in fines, civil claims and prosecution costs arising from a 1988 procurement scandal.

Times staff writers John Johnson and Patrice Apodaca contributed to this report. Curtiss reported from Los Angeles and Vartabedian from Washington.