Northrop Agrees to Settle Fraud Charges

Defense contractor Northrop Grumman Corp. said Tuesday that it had agreed to pay $62 million to settle fraud charges brought by two whistle-blowers over work it did on the B-2 stealth bomber and other government contracts.

The settlement ends a 15-year-old civil suit first brought by four former Northrop Grumman workers in Illinois. Two of those plaintiffs later dropped out of the case. The lawsuit, first filed in 1989, was scheduled for trial in June.

Northrop, based in Century City, said it continued to deny all charges of wrongdoing and settled to allow management “to focus on the company’s excellent business prospects.”

The company will pay a total of $99 million in the first quarter, including legal fees, to settle the case.

Northrop recorded a $35-million pretax charge in the fourth quarter, which resulted in a restatement of earnings for that quarter and for the full 2004 fiscal year.

The third-largest U.S. defense contractor was facing a possible total judgment of $1.11 billion in the case.

The plaintiffs were seeking $369 million in damages, a judgment that could have been tripled under the terms of the False Claims Act.

Northrop was charged with allegedly submitting false contract proposals and claims for payment from its Defense Systems Division in Rolling Meadows, Ill. The government claimed it was defrauded out of tens of millions of dollars as a result of false charges.

The government also alleged that Northrop lied to obtain a $254-million federal contract to build a radar-jamming device for the B-2. The government said Northrop then submitted false claims for payments on the contract, which was later canceled.

The government will pay $12.4 million of the settlement to two former Northrop employees who first brought the charges.

As a result of the fourth-quarter charge, Northrop restated its fourth-quarter net income to $273 million, or 74 cents a share, instead of the $296 million, or 81 cents, it originally reported.

For the full 2004 fiscal year, Northrop said its net income was $1.09 billion, or $2.99 a share, instead of the $1.12 billion, or $3.06, originally reported.

Shares of Northrop Grumman rose 86 cents to $53.76 on the New York Stock Exchange.