General Dynamics Corp. lost its bid to collect $25 million in attorneys' fees from the U.S. government over a bungled criminal investigation. The Falls Church, Va.-based defense contractor had won the fees in federal court after a judge found that a Defense Department auditor was negligent in finding that General Dynamics had defrauded the government of $8 million. But a Pasadena panel of the U.S. 9th Circuit Court of Appeals reversed that award, ruling that the misguided auditor's report wasn't responsible for the investigation but simply provided a foundation for prosecutors, who are generally immune from lawsuits. The dispute dates to a 1978 contract to develop prototypes for an air defense system. The auditor found that General Dynamics had lied to the government, and the company was indicted. Only after the prosecutors had subpoenaed millions of documents, at great cost to General Dynamics, did the company finally convince the government that the auditor had confused the type of contract that had been awarded.
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