By Andy Pasztor
A former Northrop Grumman Corp. official has alleged the company
defrauded the U.S. government of as much as $62 million years ago
as part of a failed contract for antimissile systems intended to be
installed on airliners, according to a lawsuit unsealed on
Thursday.
Filed by the former Northrop official who once helped run the
high-profile program, the suit alleges that in 2007 and 2008 the
company intentionally inflated costs, presented false bills, lied
about progress and withheld test data from the Department of
Homeland Security.
The suit alleges the contractor "stole by playing accounting
games" and in the end, delivered "nothing of value to the
government" despite years of effort and a total taxpayer investment
of $150 million to develop onboard devices designed to protect
airliners from shoulder-fired-missile attacks by terrorists. The
development effort ended in 2008.
A spokesman for the Falls Church, Va., company said it typically
"doesn't comment on matters of litigation."
Originally filed in federal district court in Chicago in 2009
and amended earlier this month, the suit by Leo Danielides, the
former program manager, sought recoveries on behalf of the
government under the federal False Claims Act. It was unsealed
after the Justice Department, which investigated the matter
starting in 2009, didn't move to join the claims and take over
litigation.
The Justice Department didn't immediately respond to a request
for comment.
The antimissile effort, dubbed the Counter-Man-Portable Air
Defense System, gained prominence after an unsuccessful 2002
missile attack on an Israeli commercial jet taking off from
Mombasa, Kenya. Northrop, which had experience providing onboard
missile-protection devices for Pentagon aircraft, by 2006 had
developed some early commercial systems, or "pods," relying on
lasers. Homeland Security, which wanted increased reliability for
airliner applications, awarded the company a follow-on contract for
in-flight testing and improvements.
In its proposal, according to the suit, Northrop told the
government Northwest Airlines had agreed to partner with it even
though the plaintiff's supervisor at the company "knew that such
subcontracting was not feasible, and had no intention of ever
entering into such a contract."
From the beginning of the work, according to the suit, Northrop
promised "to do work that it never intended to do" and the company
"was doing virtually nothing to improve the design and reliability"
of the system.
Before the program folded, Northrop officials said the company's
so-called Guardian system installed on a number of FedEx Corp.
cargo planes had achieved important milestones.
But Northrop was "just flying the pods around on test planes
without analyzing the data," according to Michael Behn, the lawyer
who filed the suit and has won sizable False Claims Act recoveries
from Northrop and other federal contractors in earlier cases.
The lawsuit alleges, among other things, that Northrop opted to
"provide only minimal, token or sham efforts" to enhance
reliability of the Guardian technology, and to "do no work at all
when that could be concealed from the government."
The company received a 25% profit on the follow-on contract,
double the negotiated rate, according to the suit. The action also
alleges company officials balked at coming up with improvements for
commercial variants of antimissile systems because they recognized
that "increased reliability would reduce Northrop's lucrative
business of providing spares and replacements to the Department of
Defense."
After Northrop's final contract ended, Homeland Security awarded
the next phase of the work to British rival BAE Systems Inc. But
Congress soon cut off funding for all development.
Write to Andy Pasztor at andy.pasztor@wsj.com
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