U.S. Sues Northrop Unit Over Alleged Overcharging

Northrop Grumman Corp.’s Newport News Shipbuilding Inc. charged the Navy $72 million for costs incurred on work for other customers from 1994 to 1999, the Justice Department contends in a lawsuit filed Monday.

The government accuses Newport News of billing the Navy for costs related to the design and development of double-hulled tankers the company was building for commercial customers.

Northrop became the biggest U.S. builder of warships last year after buying Newport News for $2.6 billion and Litton Industries Inc. for $5.2 billion. The suit was brought under the False Claims Act, which would allow a court to assess triple damages and civil penalties if the government proves its case.

“We are disappointed that the government has chosen to file suit,” Newport News said. “We have made several good-faith attempts to resolve this matter without the need for litigation.”

The suit, filed in U.S. District Court in Alexandria, Va., claims that Newport News continued to bill the Navy for costs associated with other customers’ projects even after senior staff and its consultant, the now-defunct accounting firm Arthur Andersen, warned in 1995 that the charges may have violated the False Claims Act.

Century City-based Northrop last week reported that fourth-quarter net income rose to $224 million, or $1.72 a share, from $131 million, or $1.28 cents, a year earlier. Sales increased to $4.83 billion from $4.14 billion.

Northrop is the third-largest U.S. defense contractor, behind Lockheed Martin Corp. and Boeing Co., based on the value of Pentagon contracts last year. Northrop shares rose 92 cents to $92.33 on the New York Stock Exchange.