Defense Contracting

Northrop, a major defense contracting company, settled a whistleblower False Claims Act suit by paying a total of $134 million.  The suit involved Northrop’s design, development, testing, and manufacture of defense electronic systems for use in high-technology, state-of-the-art military aircraft.  

The false claims allegations fell into two categories. First, Northrop allegedly engaged in a fraudulent accounting scheme by routinely submitting false contract proposals and claims for progress payments based on improper accounting for materials and material costs.  Northrop concealed basic problems in its handling of inventory, scrap, and attrition, and its materials accounting systems lacked even basic data integrity.  But in order to do business with the government, Northrop routinely represented that it had an adequate accounting system.  Relators alleged that these representations were false and that, as a result, Northrop submitted false bills and proposals for military contracts.  

The second category of alleged fraud involved a radar jamming device for the B-2 “Stealth” Bomber, called the “ZSR-62.”  Northrop allegedly lied to the government during a “Critical Design Review” regarding progress that it had made designing the device and, as a result, the Air Force awarded Northrop a multi-million dollar contract to build it.  After two additional years of funding, the Air Force cancelled the contract.