Legal News

In Northrop Grumman Settlement, Plaintiff Walks Away With $48.7 Million

By Ashby Jones

In the deep recesses of our mind, the Law Blog keeps a list of all those people he’d like to be in his next life. They include: former California Angels second-baseman Bobby Grich, former Smiths’ guitarist Johnny Marr, and, yes, the Law Blogger, all over again. But this morning, we’ve added yet another role to the list: someone who blows the whistle on some alleged government-contracts fraud, sues, and walks away with a cool $40 million. (In the hope of inspiring our first-born child to pursue this latter track, we’re mulling the name “Qui Tam” for our first-born child. Qui Tam Jones, we like the ring.)

In any event, on Thursday, Northrop Grumman Corp. agreed to pay the U.S. government $325 million to settle civil claims that a company it acquired allegedly made defective parts for spy satellites several years ago. The original plaintiff in the case will reportedly share with his lawyer $48.7 million of the settlement. Not a bad gig if you can get it. Click here for the WSJ story on the settlement.

The suit alleged that officials at TRW Inc., which Northrop acquired in 2002, previously worked with a federally funded space research outfit to cover up problems with certain widely used microelectronic parts. The result included a number of satellites failing in orbit, along with expensive fixes and launch delays, according to court documents.

The settlement is the largest ever of a so-called whistleblower case alleging military-procurement fraud. Northrop Grumman didn’t admit any wrongdoing, partly, it seems, because the allegations all relate to events that occurred before Northrop closed its $6.7 billion acquisition of TRW in December 2002.

The agreement also ends a separate lawsuit filed by Northrop against the Pentagon over an unrelated contract for stealthy cruise missiles. In that longstanding case, Northrop had sought $1 billion, according to the Justice Department. Now, the government will pay Northrop the same amount — $325 million — to avoid further expenses and distraction from protracted litigation, according to the agreement.

Robert Ferro, an Aerospace Corp. official who first discovered the problem, alleged that in 1995 TRW pressured him against publishing his findings highlighting problems with the transistors. Even after subsequent TRW tests confirmed Mr. Ferro’s conclusions and government satellites started failing during 2001 and 2002, according to the suit, TRW continued to tell the government “it did not know and could not have been expected to know” about the problems beforehand.

Full post as published by Law Blog - WSJ.com on April 03, 2009 (boomark / email).