$2.2-Million Settlement Against Teledyne Ends Whistle-Blower Suits : Defense: Ex-employee George Cave will get $300,000, plus attorney’s fees. Company denies wrongdoing.

A $2.2-million fraud settlement against Teledyne Industries this week ended the last of a group of civil and whistle-blower lawsuits that have cost the beleaguered defense contractor upward of $19 million since 1991.

And while Teledyne on Friday denied any wrongdoing at its former Newbury Park plant during tests of sophisticated radio devices, the attorney who won the case called the settlement a victory for the little guy and a blow against defense contract fraud.

“Every time a whistle-blower prevails . . . especially in the defense industry . . . it’s a good message,” said attorney Phil Benson. “Sometimes, they don’t win. They end up losers because the system crushes them.”

Rather than being crushed, former Teledyne test engineer George Cave is to receive $300,000 of the $2 million the contractor must pay to the U.S. government, plus $200,000 for his attorney’s fees.

It was Cave who filed a suit on July 26, 1994, under the controversial whistle-blower segment of the federal False Claims Act.

While federal investigators tout the 1986 whistle-blower measure as one of their toughest tools for fighting defense fraud, some contractors argue the law improperly rewards greedy malcontents for filing frivolous claims that force companies to spend big money defending themselves.

Yet in all, whistle-blower suits have returned nearly $1 billion to the federal government since 1986.

Cave’s suit alleged that Teledyne harassed Cave into quitting after he told investigators his company was using falsified tests to sell substandard radio gear to the U.S. government.

“We deny the allegations in the case that has been settled,” Bill Acton, a Teledyne spokesman, said Friday. “But we believe the settlement is appropriate in view of the costs and the uncertainties of litigation . . . We do not consider this a major problem.”

Teledyne sold its Newbury Park operation to Litton Industries Inc. in January, Acton said, for what company officials said were strategic business reasons having nothing to do with the allegations.

But Benson said the settlement shows that Teledyne is taking care of its legal liabilities and “starting to resume its position as a profitable company.”

“I wish other defense contractors would take cases of fraud as seriously,” he said. “One of the best things Congress has ever done for this country was to pass this statute, because it has forced the defense industry to become efficient and honest tenfold.”

Cave could not be reached Friday for comment.

But his suit outlines allegations that between 1984 and 1994, Teledyne falsified documents, used bogus test gear and even painted inferior parts to look like the proper equipment just so the company could keep shipping its products without costly delays.

Cave had worked at the Teledyne Electronics Systems plant in Newbury Park, which made Identification Friend or Foe radio transponders, or IFFs.

Jet fighters and other military aircraft equipped with IFFs automatically identify planes to ground-based and airborne radar to prevent aircraft gunners from shooting them down in “friendly fire.”

In 1991, at the height of Operation Desert Storm, federal investigators began probing Teledyne’s testing procedures for IFFs after another Teledyne Electronics worker filed a whistle-blower lawsuit against the company.

When Cave cooperated with investigators, his suit says, people made phone threats, fellow employees falsely accused him of turning Teledyne in to federal authorities, and the company demoted him.

Finally, the suit says, Cave was told to quit or be laid off. He quit.

The suit he filed just weeks later alleges that Teledyne workers:

* Rigged the cable between test equipment and an IFF being tested so that the test gear would produce passing results for IFFs that were actually failing.

* Falsely certified that IFFs had passed tests.

* Experienced so many IFF failures in production tests that they installed switches on test chambers so they could turn on indicator lights to show that a faulty unit was “passing” tests.

* Changed serial numbers on faulty IFFs to cover the bogus tests.

* Claimed to have calibrated test gear that never was properly adjusted.

* Ducked a costly rebuild--replacing resistors that were causing problems--by simply painting the wrong parts to look like the right ones.