FOR IMMEDIATE RELEASE CIV
TUESDAY, SEPTEMBER 10, 1996 (202) 616-2765
TDD (202) 514-1888
HUGHES AIRCRAFT PAYS $4.05 MILLION TO SETTLE FRAUD CASE
WASHINGTON, D.C. -- Hughes Aircraft Company will pay the
United States $4,050,000 to settle claims the company failed to
perform certain tests on components used in advanced electronic
equipment such as radar units for military aircraft, missile
guidance units and delicate tracking equipment, the Department of
Justice announced today.
Assistant Attorney General Frank W. Hunger, in charge of the
Civil Division, said the agreement settled a fraud suit brought
originally on May 29, 1990, in U.S. District Court in Los Angeles
by two private citizens, Margaret Goodearl and Ruth Aldred, and a
non-profit corporation, Taxpayers Against Fraud. The government
intervened and took over the case after a lengthy investigation.
In filing an amended complaint, the Department alleged that
from early 1985 and continuing at least though January 9, 1987,
Hughes failed to perform certain environmental screening tests on
the electronic components--microcircuits known as hybrids--that
were manufactured, tested and shipped by Hughes from its
Microelectronic Circuits Division at Newport Beach, California.
The complaint further alleged that Hughes supervisors
instructed employees in the Environmental Test Area, including
Goodearl and Aldred, to omit tests, to shorten required
procedures, to pass hybrids that had failed particular tests, to
perform unauthorized and undocumented rework on hybrids that had
failed particular tests and to perform the tests by falsifying
the documents accompanying each piece through the manufacturing
process to show that the tests had been properly done.
As a result, the company allegedly submitted false claims on
all of the prime contracts it held or, where Hughes was the
subcontractor, caused the prime contractor to do so.
Approximately 75 government programs involving all branches
of the military were affected, including the Navy's F-14, F-18
and A6E aircraft, the Air Force's F-15 aircraft, the AAMRAM and
Phoenix missile programs, and the Army's M-1 tank.
The suit was filed under the qui tam provisions of the False
Claims Act, 31 U.S.C. 3729-31. Private citizens bringing an
original action under the act are known as "relators" and are
entitled to an award of a portion of the amount recovered by the
government not to exceed 25 percent in these circumstances.
Under the agreement settling the case, the relators will receive
an award of $891,000 out of the $4,050,000 payment to the
government. Hughes will pay a separate and additional $450,000
to relators' counsel to cover attorneys' fees, costs and
expenses.
In a related criminal case that concerned only charges
relating to the AAMRAM program, Hughes was convicted in 1993 of
conspiring to defraud the government by knowingly and
deliberately producing hybrids that had not been tested in the
manner specified by the contract and applicable military
specifications. Hughes was fined $3.5 million.
Hughes's conviction and fine were affirmed on appeal,
United States v. Hughes, 20 F.3d 974 (9th Cir.), cert. denied,
115 S.Ct. 482 (1994). A Hughes supervisor was acquitted of
criminal charges in the same case.
The civil action was handled by the Department's Civil
Division, Commercial Litigation Branch, with assistance from the
Air Force Office of Special Investigations and the Defense
Criminal Investigative Service.
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