U.S. Reported Ready to Join Northrop Lawsuit

LOS ANGELES —  The Justice Department will join a civil suit filed by a whistle-blowing employee at the Northrop Corp., charging the defense contractor with fraud in connection with the MX missile project, attorneys in the case said today.

The suit filed by David Peterson, a former Northrop worker, alleges that the company defrauded the government of up to $100 million through overcharges and the use of uncertified parts.

The Justice Department’s involvement in the case complicates matters for Northrop, which thought it had put the matter to rest a few weeks ago when a federal judge dismissed a $3-million government suit related to the same program against the company.

It could also tarnish Northrop’s image at a crucial time when the contractor is trying to persuade Congress not to cut off funding for the B-2 Stealth bomber, which could cost $70 billion.

Attorneys for Peterson told Reuters the case is still under seal in U.S. District Court in Los Angeles, but may be opened soon, allowing the plaintiffs to proceed.

Capitol Hill sources earlier leaked news of the pending Justice Department action because of the politically sensitive nature of defense fraud probes and the amount of the potential award, the attorneys said.

Damages Could Soar

Damages could be trebled to around $300 million under the False Claims Act, or “whistle-blower law,” said Phillip Benson, an attorney with Herbert Hafif, the firm handling Peterson’s suit.

Under that law, the Justice Department has 60 days to tell the court whether it wants to join in the litigation.

A Justice Department spokesman told Reuters he could not discuss the Peterson case while it remains under seal, and Northrop had no comment on the litigation.

Although the details of the Peterson case are under seal, his allegations are generally known. In earlier testimony before Congress he described how Northrop had set up shell companies to circumvent the tortuous procurement process.

Peterson also testified that the company once threw away duplicate MX parts that arrived just before an Air Force audit, and that it improperly tested other parts, some of which he said were bought at Radio Shack stores and installed in the guidance systems.

Contrary to published reports, Benson said Northrop has made no move to settle the civil charges out of court, and his firm is eager to go to trial.