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9 April 2009


Northrop Grumman settles $325m False Claims lawsuit concerning defective satellite HBTs

The United States Justice Department has announced that Northrop Grumman Corp, its subsidiary Northrop Grumman Space and Mission Systems Corp, and its predecessor TRW Inc have agreed to settle for $325m the False Claims Act allegations that Northrop provided and billed the National Reconnaissance Office (NRO) for defective heterojunction bipolar transistors (HBTs).

The government’s investigation (which began in 2003) concluded that TRW failed to properly test and qualify HBTs that it manufactured between 1992 and 2002. As a result, defective HBTs were subsequently integrated into NRO satellite equipment. The investigation further concluded that Northrop and TRW made misrepresentations and concealed certain material facts regarding the reliability of the HBTs.

“The settlement of the HBT case demonstrates that the Department of Justice will investigate even the most complex and challenging allegations,” says Michael F. Hertz, acting assistant attorney general for the Justice Department’s Civil Division. “Today’s settlement demonstrates that defense contractors will be held accountable and that the government will aggressively pursue all allegations of misconduct in the procurement process,” he adds.

The settlement resolves a whistleblower lawsuit filed against Northrop in the US District Court in the Central District of California in 2002 (when Northrop Grumman acquired TRW) by Dr Robert Ferro of The Aerospace Corp. The government intervened in the lawsuit in November 2008. Under the agreement, Ferro will receive $48.75m as his 15-25% share of the recovery in the HBT action stipulated under 'qui tam' provisions of the False Claims Act.

At the same time, the Justice Department (assisted by the Air Force General Counsel’s office) also settled a Contract Disputes Act action filed by Northrop in 1996 in the US Court of Federal Claims in Washington concerning concerned the government's decision to terminate (due to cost and schedule overruns) Northrop’s contract with the Air Force to develop and produce the Tri-Service Standoff Attack Missile (TSSAM), a low-cost, low-observable, tactical cruise missile. The TSSAM action has been settled for $325m, resolving Northrop’s claims in excess $1bn and bringing to a close the 12-year litigation. The TSSAM settlement therefore offsets the $325m the False Claims settlement, so Northrop Grumman will make no net payment to the US government.

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