Teledyne Units Settle ’95 Suit for $14 Million

A group of Teledyne companies has paid the U.S. $13.95 million to settle a whistle-blower lawsuit that accused a Northridge division of overcharging the federal government for equipment repair and calibration work, the U.S. attorney’s office announced Wednesday.

Robert Giardini, who for five years was in charge of quality assurance at Teledyne Systems Co. and its successor, Teledyne Electronic Systems, brought his allegations to attorneys three years ago. Giardini said he had long suspected that Teledyne was billing the government for overhead costs that should have been charged to the company’s commercial clients.

The $13.95 million compensates the U.S. for the extra money it paid over the period covered by Giardini’s 1995 lawsuit, plus interest, according to the U.S. attorney’s office in Los Angeles. Eric Havian, an attorney from the Phillips & Cohen law firm in San Francisco who represented Giardini, said Teledyne’s overbilling began in 1980 and may have cost the government as much as $20 million.

Allegheny Teledyne, the Pittsburgh company that resulted from last year’s merger of Los Angeles-based Teledyne and Allegheny Ludlum, paid the settlement on Friday. The lawsuit was unsealed late last week and made public on Wednesday. Bill Acton, director of public relations for Allegheny Teledyne, declined to comment on the settlement.

Under the federal False Claims Act, Giardini is entitled to 15% to 25% of the $13.95-million settlement. His exact award will be determined in the next few months.

Giardini said he became suspicious of Teledyne Systems’ billing practices when he joined the company in 1988 and found that its metrology department--which repairs and calibrates measurement equipment--had six or seven times as many employees as other firms where he had worked.

Giardini said that two years later, when he was vice president of product assurance, he learned that the company’s work for commercial customers was producing 70% profit margins. When he asked to look at the books, the finance department refused to hand them over.

“That didn’t sit very well,” Giardini said Wednesday from his home in Chatsworth. “It really bothered me. I’d go home and think, ‘There’s just something wrong here.’ ”

Giardini began gathering evidence in earnest in mid-1994, after Litton Industries agreed to buy Teledyne Electronic Systems and rumors were flying that executives would be laid off. Giardini, who, in effect, took an early retirement, said he couldn’t afford to bring his suspicions to lawyers sooner because, “I would have been terminated.”

Litton Industries was also named as a defendant in the suit. The Woodland Hills-based defense contractor resolved its part of the case in May 1996 by making a $265,000 adjustment to its overhead calculations for the government, Litton spokeswoman Kathleen Wailes said.

The Defense Contract Auditing Agency began investigating the Teledyne units in 1991 and discovered that the company had created an accounting category called “other direct costs,” said Susan Hershman, an assistant U.S. attorney in Los Angeles. After Giardini filed his whistle-blower lawsuit, the civil division of the Justice Department came to believe that the “other direct costs” category was created to facilitate the illegal cost-shifting from commercial customers to the government, Hershman said.

“If Bob [Giardini] hadn’t come along, the [Justice] Department probably would not have” become involved in the case, she said.