Federal Agents Raid Offices of Litton Industries

Federal agents seized thousands of records from the headquarters of defense contractor Litton Industries 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, the FBI and the Air Force descended on the Canoga Avenue complex 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.

A senior federal law enforcement official said Wednesday that 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 triggered 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 officials 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 regulations since all bids are supposed to be supported by actual cost data.

“This is a real sensitive case we have right now,” said DCIS spokesman Al White, who declined RAIDXxxto 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 park-like grounds just north of the Ventura Freeway. A Litton employee said workers were frightened and not “really sure what was going on.” Company officials made announcements at frequent intervals to calm employees.

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 ending 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 that the company used illegal accounting techniques to charge the Pentagon for data-processing costs that should have been borne by commercial customers.

Last July, The Times learned that the Internal Revenue Service had begun investigating whether Litton made millions of dollars in improper payments to a leading member of the Saudi royal family, and whether the company improperly claimed tax write-offs on the alleged payments. Litton denied the allegations, which were contained in court papers and IRS correspondence.

Also, 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 probe, initiated after an employee blew the whistle on 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. That case involved allegations that executives of Litton’s data systems division hired consultants with contacts inside the Pentagon to provide them with confidential information needed to win three military contracts.

Staff writers John Johnson and Patrice Apodaca contributed to this story. Curtiss reported from Los Angeles and Vartabedian from Washington.