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Sat, Apr 04, 2009

Northrop Grumman Pays $325 Million To Settle Whistleblower Case

Scientist Exposed Faulty Military Satellite Parts

A company's efforts to stop a scientist from revealing his research findings about faulty electronic components the company sold to the government for military and intelligence-gathering satellites were the basis for a whistleblower lawsuit that Northrop Grumman Corp. settled this week, for a record sum of $325 million.

Today's settlement is the largest one ever paid by a defense contractor in a "qui tam" (whistleblower) case and the second largest settlement ever paid involving defense contractor fraud. The suit was filed against the former TRW Inc, which was acquired by Northrop Grumman in 2002.

The whistleblower, Robert Ferro, will be awarded $48.7 million for his work and the work of his attorneys on the case. The False Claims Act requires the government to reward whistleblowers 15 percent to 25 percent of the amount the government recovers as a result of a qui tam case.

The lawsuit -- joined by the government and made public Thursday -- alleged that TRW, which Northrop Grumman acquired in 2002, sold to the government components known as "heterojunction bipolar transistors," or "HBTs," that TRW knew were likely to fail in government satellites.

The qui tam lawsuit says a government satellite "experienced critical failures" while in orbit in 2001, but at that time the government didn't know that TRW had long been aware that failures of its components were likely.

Ferro claimed research done in 1995 demonstrated the parts would fail if placed in satellites, but TRW didn't inform the government of this before or after the problem occurred. Several government programs delayed launch of their satellites to determine the cause of the problems with the satellite in space. Those programs eventually replaced the HBTs in their satellites.

"TRW deliberately suppressed Robert Ferro's findings and sold the components to the government knowing that those parts were likely to fail," said Eric R. Havian, a San Francisco attorney whose firm, Phillips & Cohen LLP, represents Ferro. "Even after a satellite in space experienced serious anomalies, TRW still refused to reveal the problems found earlier with the components and had the gall to charge the government millions to investigate what went wrong with the satellite."

TRW also withheld from the government information about a massive recall of cell phone equipment because they contained similarly defective TRW HBTs just a month before the government began to experience its own HBT failures. Instead, TRW said the government problems were the result of a new defect that had never been seen before.

FMI: www.northropgrumman.com, www.phillipsandcohen.com/

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