In one of the nation's largest whistle-blower settlements, Northrop Grumman Corp. said Monday that it would pay the federal government $111.2 million to resolve claims that TRW Inc., which it recently acquired, padded bills for defense work done in the early 1990s.
The agreement ends a nine-year legal fight initiated by Richard Bagley, a former chief financial officer for TRW's Redondo Beach unit. Bagley alleged that TRW overcharged the Pentagon for work on several space electronics programs.
Bagley, who filed a lawsuit in 1994 under the U.S. False Claims Act, will be awarded 24.5% of the total settlement, near the maximum allowed under law to reward employees who report fraud against the government. The act allows whistle-blowers to sue contractors on behalf of the government and share in the recovery.
The U.S. attorney's office in Los Angeles said Bagley would receive $27.2 million, one of the largest payments to an individual whistle-blower, because of his "extraordinary resolve and tenacity" in pursuing the case.
"It was very unusual to the degree he followed what he believed was right, and as a result we felt he deserved the high reward," said Susan R. Hershman, the assistant U.S. attorney who handled the case.
Bagley, who now lives in Henderson, Nev., declined to comment. His attorneys said Bagley, 64, had been unable to get a job since being laid off by TRW in 1993 and had been living on a modest pension from the company. "He's relieved to get this over with," said Eric Havian, one of Bagley's attorneys. "Bagley persevered and continued to insist that these claims were valid."
Century City-based Northrop is the nation's second-largest defense contractor. Under terms of the settlement, Northrop denied any wrongdoing.
"Our opinion is we didn't do anything wrong, but it doesn't mean that the jury won't find it differently," said Richard B. Waugh, Northrop's chief financial officer. "If the government felt they had a cold case, they wouldn't have settled either."
The lawsuit had been scheduled to go to trial in November.
The False Claims Act dates to the Civil War and was amended in 1986 to attract more whistle-blowers. In what amounts to a bounty hunter system, individuals can sue on behalf of the government. If the government joins the case, typically a whistle-blower will get from 15% to a maximum 25%; if the whistle-blower goes it alone and wins, the top payout is 30%.
