In one of the nation's largest settlements in a whistle-blower case, Northrop Grumman Corp. has agreed to pay the federal government $325 million to resolve claims that TRW, which it acquired in 2002, provided defective parts for a spy satellite program in the 1990s.
But in an unusual twist, the federal government also announced Thursday that it had settled a separate, long-running dispute with Northrop and agreed to pay the aerospace company $325 million -- essentially meaning that no money will change hands.
In an e-mail, a Justice Department official said that because the two settlements with Northrop were of equal amounts, "no money is exchanged."
Though Century City-based Northrop was the loser in the whistle-blower case, it successfully resolved a 13-year-old dispute over a missile program that was canceled in 1995 for what the government said were cost and schedule overruns.
In the TRW-Northrop whistle-blower case, the settlement ended a seven-year legal fight initiated by Robert Ferro, a Newbury Park resident who was awarded $48.7 million. But instead of it being paid by Northrop, it will be paid by "Treasury's fund," the Justice Department official said.
Northrop said that because the settlements offset each other, they would have no material impact on its finances.
Ferro said in his lawsuit that TRW sold the government electronic components that the company knew would fail. Ferro is an electrical engineer for the Aerospace Corp., a federally funded research lab that was evaluating a satellite transistor for the Pentagon.
The whistle-blower filed the lawsuit in 2002 under the False Claims Act, which allows people not affiliated with the government to sue federal contractors on behalf of the government.
If the claimants are successful, they are entitled to 15% to 25% of the total settlement.
Ferro's attorney's said the settlement with his client was the largest ever in a Pentagon whistle-blower case. In 2003, the same attorney, Eric R. Havian of San Francisco, represented another TRW whistle-blower, who was awarded $27.2 million in a case involving padded bills for defense work done in the early 1990s.
In the latest case, Ferro alleged that research conducted in 1995 "clearly demonstrated" the parts would fail if placed in satellites that were being developed for the secretive National Reconnaissance Office. But TRW didn't inform the government of the findings even after problems ensued.
Northrop said that "while the company believes it acted properly under its contracts and had substantive defenses to the claims, it also believes that settlement is in the best interest of all parties as it releases the company from the government's claims, avoids litigation and preserves a valued customer relationship."