Subject:  Northrop to Pay $111 Mln to Settle Suit |
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Date Posted: 16:45:02 06/09/03 Mon
Northrop to Pay $111 Mln to Settle Suit
By REUTERS
Filed at 3:23 p.m. ET
LOS ANGELES ( Reuters) - Defense contractor Northrop Grumman Corp. (NOC.N) on Monday said it will pay $111 million to settle a federal lawsuit claiming it overcharged on space projects.
The settlement also addressed a whistleblower's allegations that TRW, acquired by Northrop Grumman in December 2002, had billed the government for work done on nongovernment contracts from 1990 to 1997.
Northrop said it ``expressly denied any liability for violating the False Claims Act.''
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Two lawsuits, brought by former TRW employee Richard Bagley and the U.S. Department of Justice, were originally sealed in 1994 and 1995 in U.S. District Court for the Central District of California, the company said.
Bagley, the former director of financial control at TRW's Space & Technology Group, sued his then-employer, alleging it hid research costs for government space projects, and billed NASA for private-sector research costs.
Bagley accused TRW of misclassifying the costs of developing a solar-powered satellite wing and a ``space bus'' for launching satellites to avoid NASA's caps on such expenses.
U.S. Attorney Debra Yang alleged the company padded its overhead costs to hide cost overruns in research and development on the two projects.
Yang alleged the company also charged the government for two private projects. TRW recovered nearly all of the $11 million it spent to develop a private proposal for a satellite telephone system and for research done by its Center for Automotive Technology, she said.
The U.S. Department of Justice intervened in Bagley's suits in 1998 and took over the litigation in 2000, Yang said. The consolidated cases were scheduled to go to trial in November.
``TRW could have settled the case five years ago for about one-quarter of what it ended up paying,'' said Eric Havian, a San Francisco attorney who represented Bagley.
Under the whistleblower provisions of the False Claims Act, Bagley will receive $27.2 million of the settlement.
Despite the settlement, Northrop still faces other federal suits. In the early 1990s, Northrop was a frequent target of federal civil and criminal investigations, but Chief Executive Kent Kresa has strived to shore up the company's reputation.
Los Angeles-based Northrop assumed it would settle the lawsuits when it bought TRW and would cut into its cash from operations, it said.
It still expects earnings of $3.80 to $4.20 per share for 2003. Although cash from operations will be affected by the settlement, the company still forecasts 2003 cash from operations of $1.1 billion to $1.3 billion, excluding a $1 billion tax payment in the first quarter related to the B-2 bomber program.
Northrop shares slid $2.45 to $82.95 Monday afternoon on the New York Stock Exchange.
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