Northrop to pay 62 million dollars to settle contract fraud allegations

WAR.WIRE

Northrop to pay 62 million dollars to settle contract fraud allegations
CHICAGO (AFP) Mar 01, 2005
US defense giant Northrop Grumman agreed to pay 62 million dollars to resolve allegations of overcharging the government in a contract for the B-2 Spirit "stealth" bomber, officials said Tuesday.

The settlement was reached in a 15-year-old civil lawsuit under the federal False Claims Act that was scheduled for trial in June.

The company was accused of fraudulently accounting for materials purportedly used in multiple defense contracts and inflating the costs of a radar jamming device for the plane under an Air Force contract.

The settlement calls for 12.4 million dollars of the sum to be paid by Northrop to be turned over to two former Northrop employees who alerted the government to the fraud, under the so-called "whistleblower" law.

The two -- James Holzrichter, a former auditor, and Rex Robinson, a since-deceased test engineer -- worked at Northrop's Defense Systems Division facility in Rolling Meadows, Illinois. They filed the civil fraud case in 1989, and the government joined the case in 2001.

"Government partnerships with defense contractors require honesty and candor to provide the best military equipment at the most efficient price," said US Attorney Patrick Fitzgerald of the Northern District of Illinois, where the case was filed.

"This settlement shows that the government will pursue its legal remedies when that trust is violated. Contractors must know that government business is not a blank check."

Both Holzrichter and Robinson were fired and sued Northrop for employment discrimination in addition to the fraud. Their personal claims were settled separately.

In a statement, Los Angeles-based Northrop said it "expressly denied any liability for violating the False Claims Act and has agreed to settle this matter, allowing the company's management to focus on the company's excellent business prospects."

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