Starr Presents Hughes’ Case to High Court

Whitewater prosecutor Kenneth W. Starr appeared before the Supreme Court on Tuesday to defend Hughes Electronics Corp. against a whistle-blower lawsuit alleging that the Los Angeles aerospace firm bilked the government in its work on the B-2 bomber.

The suit should be thrown out before trial, Starr said, because the allegations of fraud were already known to government auditors.

“The information was flowing to the government,” he argued, so there is no value in allowing a private whistle-blower to sue for a portion of any recovery.

The Hughes case has drawn wide attention in the defense industry, which has been beset by whistle-blower suits over the last decade.

The law allowing private suits that reveal “false claims” for government money dates back to the Civil War. Congress made it easier to bring these whistle-blower claims in 1986 in hopes of ferreting out fraud by contractors. Since then, more than 1,100 whistle-blower suits have been filed, many of them against contractors in the aerospace industry.

If successful, the whistle-blowers can keep as much as 30% of the money recovered but only a handful of them have ultimately prevailed.

Starr did not appear to be at peak form in his arguments. Bobbing back and forth at the lectern, he struggled to answer a series of pointed questions from the bench.

For example, the law says that a whistle-blower cannot bring a suit if there has been “public disclosure” of the alleged fraud. Starr maintained that, because the government had audited Hughes, the information about cost-shifting between two projects was already disclosed.

“It doesn’t say that,” interrupted Justice Antonin Scalia, noting the use of the word “public” in the law. “That’s the problem,” he said.

Starr made more headway with another argument: that the government was not bilked by Hughes because an audit showed the company had fairly allocated its costs. This alone was grounds for throwing the suit out, he said.

An attorney for the whistle-blower, former Hughes contract officer William J. Schumer, said that the case should go to trial so his client can try to prove his allegations of fraud.

A Justice Department attorney agreed mostly with Schumer, arguing that internal government audit is not grounds for dismissing a whistle-blower’s suit. A ruling in Hughes vs. Schumer, 95-1340, can be expected in several months.