Bloomberg News

Northrop Grumman Accused of Missile-Defense Contract Fraud (1)

January 30, 2014

Northrop Grumman Corp. (NOC:US) was accused in a whistle-blower lawsuit by a former employee of lying to the U.S. government about steps it took to develop a civilian airliner missile-defense system.

Northrop Grumman lied about its progress and failed to deliver a viable product after being paid more than $62 million for the third phase alone of a project the defense contractor once called the Guardian System, according to the complaint filed in 2009 by Leo Danielides, an Illinois resident.

U.S. District Judge Ruben Castillo in Chicago ordered the lawsuit unsealed yesterday after the government said in a Jan. 22 filing that it couldn’t decided whether to join the case because it hadn’t completed its investigation.

Development of a civilian airliner missile-defense system was spurred by the 2002 launching of two shoulder-fired missiles aimed at an Arkia Israeli Airlines Ltd. flight as it took off from Mombasa, Kenya, according to the complaint. In 2009 Northrop Grumman agreed to pay the U.S. $325 million to resolve a whistle-blower lawsuit over satellite parts made by TRW Inc., a company it acquired in 2002.

Randy Belote, a spokesman for Falls Church, Virginia-based Northrop Grumman, said the company doesn’t comment on pending litigation.

‘Pervasive Fraud’

“This case spotlights pervasive fraud in a counter-terrorism program that was designed to protect the flying public from shoulder-fired missiles,” Danielides’s attorney, Michael Behn of the suburban-Chicago law firm Behn & Wyetzner Chartered, said today in a phone interview.

Danielides, who worked in the program for “many years” according to the complaint, is suing on behalf of the government and seeking money damages, which would be tripled under federal law. He is also asking the judge to impose an $11,000 fine for each false statement the company is found to have made to the U.S.

Under the U.S. False Claims Act, Danielides would receive a percentage of any recovery for pursuing the case.

“Northrop repeatedly lied to the United States by promising to do work that it never intended to do, falsely representing that work was being done and covering up its misrepresentations through deceptive reports,” he said in the complaint.

The case is U.S. ex. rel Danielides v. Northrop Grumman Corp., 09-cv-07306, U.S. District Court, Northern District of Illinois (Chicago).

To contact the reporter on this story: Andrew Harris in federal court in Chicago at aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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Companies Mentioned

  • NOC
    (Northrop Grumman Corp)
    • $122.0 USD
    • 1.40
    • 1.15%
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