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Northrop, U.S. Said to Reach Accord Over Tanker Billing

The tentative deal is the latest to arise from lawsuits alleging fraudulent accounting.

August 09, 2003|Peter Pae | Times Staff Writer

Northrop Grumman Corp. has reached a tentative agreement with the Justice Department to settle allegations that its Newport News Shipbuilding Inc. unit in Virginia overcharged the Pentagon $72 million for work on a commercial tanker program, people familiar with the deal said Friday.

The agreement, coming days before the case was to go to trial in Alexandria, Va., would resolve another whistle-blower lawsuit against the Century City-based defense contractor.

Northrop at one point faced four whistle-blower suits stemming from allegations -- some more than a decade old -- that it violated accounting rules to defraud the government.

In the Newport News case, federal prosecutors alleged that the shipbuilder improperly billed the Pentagon from 1994 to 1999 for costs of researching and developing a now-defunct commercial tanker. Northrop acquired Newport News last year.

If Northrop had lost all four suits, it would have faced a possible $1.3 billion in damages. Under the federal False Claims Act, damage claims can be trebled.

In the last two months, Northrop has settled one case and has reached tentative agreements on two others. The fourth, which claims Northrop inflated costs for electronic equipment used in bombers and fighter jets, is pending in federal court. The whistle-blower in that case is seeking $113 million.

In June, Northrop agreed to a $111-million settlement to resolve federal charges that TRW Inc., a defense contractor it acquired in December 2002, overcharged the government for various space projects during the 1990s. That agreement represented one of the largest whistle-blower settlements involving a defense contractor.

Earlier this week, Northrop tentatively agreed to settle charges that it had supplied substandard aerial target drones to the Navy for a decade, starting in 1988. The government had sought $210 million.

The Justice Department and Northrop declined to comment about the deals in the Newport News and target drones cases.

It wasn't clear how much Northrop would pay to settle those two cases, but a source familiar with the talks said that the agreements should be finalized in a few weeks and that the settlement amounts were likely to be far less than the potential maximum damages the company faced.

Northrop shares Friday fell 63 cents to $90.96 on the New York Stock Exchange.

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