Buck Naked Politics: Big Contractor Northrop to Settle Fraud Suit for $325 Million

by Deb Cupples | On Friday, the Justice Department reported:

"Northrop Grumman Corp., its subsidiary Northrop Grumman Space and Mission Systems Corp., and its predecessor TRW Inc. (collectively, Northrop) have agreed to settle for $325 million, False Claims Act allegations that Northrop provided and billed the National Reconnaissance Office (NRO) for defective microelectronic parts, known as Heterojunction Bipolar Transistors (HBTs)...

"The government’s investigation in the HBT Action concluded that Northrop and TRW failed to properly test and qualify certain HBTs manufactured by TRW from 1992 to 2002. As a result, Northrop and TRW integrated into NRO satellite equipment certain defective HBTs. The investigation further concluded that Northrop and TRW made misrepresentations about, and concealed certain material facts regarding the reliability of the HBTs."

This is not the first time that Northop Grumman, or one of its subsidiaries, has behaved questionably or spent millions settling a Justice Department False Claims Act suit.

In 2003, Northrop Grumman settled for $80 million government fraud suits alleging the following: 1) that a Northrop subsidiary had overcharged the government for research and design work, and 2) that Northrop knowingly sold the Navy unmanned aerial vehicles that had defective parts.

Then there was the matter of the Advanced SEAL Delivery System (ASDS), a small hybrid submarine intended to transport Navy Seals. By May 2007, the ASDS project had cost us taxpayers $885 million but the submarine still didn't work. Northrop Grumman was the prime contractor for the project.

According to a GAO report, Northrop Grumman assumed responsibility for the ASDS contract in 1996. The program called for delivery of the first (presumably functioning) sub in July 1997.

Northrop Grumman failed to meet the deadline.

In August 2001, the Navy accepted the flawed submarine on condition that the contractor complete repairs and such within one year.

Northrop Grumman failed to fix the submarine.

In July 2003, the Navy accepted the sub "as is," relieving Northrop Grumman of responsibility for repairs. By then, we taxpayers had spent $340 million on the ASDS.

Because the Navy accepted the sub "as is," we taxpayers could not sue Northrop Grumman for any sort of refund -- despite the fact that the sub did not work at that time. No one knows why certain Navy officials decided to let Northrop off the hook.

In October 2003, despite Northrup's failures, the Navy signed another contract with Northrop Grumman. Nearly 4 years and $900 million later, we taxpayers still didn't have a fully functioning ASDS submarine.

Incidentally, Northrup is still a huge recipient of federal government contracts, as indicated in the table below.

Total Amount of Defense and
Civilian Contracts with US Govt.