National Aeronautics and Space Administration<br />Office of Inspector General<br />Washington, DC 20546<br /><br /><br />June 25, 2003<br /><br /><br />RELEASE 2003-042: NORTHROP GRUMMAN AGREES TO PAY $111.2 MILLION TO <br />SETTLE FALSE CLAIMS CASE AGAINST TRW, INC.<br /><br /><br /> On June 9, 2003, the United States Government, Richard D. Bagley (the <br />Relator), and Northrop Grumman Space and Mission Systems Corporation <br />(NGSMS), the successor to TRW, Inc., agreed to a Settlement Agreement <br />and Release. Under the Agreement, Northrop Grumman will pay the United <br />States $111.2 million to settle their civil liability involving alleged <br />violations of the False Claims Act of 1986.<br /><br /><br />The agreement resolves two lawsuits filed in November 1994 and June <br />1995 by Bagley, the former director of financial control at TRW's Space <br />and Technology Group, based at TRW's Space Park facility in Redondo <br />Beach, California.<br /><br /><br />The complaint alleged that between the years 1990 and 1997, TRW <br />employees engaged in five separate schemes that increased the costs the <br />government paid TRW. The alleged fraudulent schemes were:<br /><br /><br />- TRW allegedly mischarged independent research and development <br />(IR&D) and bid and proposal (B&P) costs when attempting to enter the <br />space launch vehicle business. TRW exceeded the government's <br />ceiling on what it paid for IR&D and B&P costs and brought forth <br />these excess costs to the government;<br />- TRW allegedly mischarged the costs of fabricating and testing a <br />prototype satellite solar array wing as "capital equipment" rather <br />than as IR&D. TRW engaged in this practice in order to avoid <br />exceeding the government ceiling on IR&D expenditures;<br />- TRW also allegedly engaged in similar mischarging practices with <br />respect to the Universal Test Bed and the Eagle Test Bed Programs. <br />TRW falsely charged the costs of their fabrication and testing as <br />"capital equipment" rather than as IR&D, avoiding the government's <br />ceiling;<br />- From 1990 through 1997, TRW engineers allegedly misclassified <br />private commercial automotive work when they were performing IR&D. <br />This caused the government to pay the private costs resulting an <br />increase in overhead and G&A costs that were applied to TRW's <br />government contracts; and<br />- TRW allegedly caused the government to falsely pay for the <br />development of a commercial satellite proposal to build a <br />telecommunications spacecraft known as Odyssey. TRW charged the <br />costs to its G&A account that caused the Government to pay most of <br />those costs.<br />NASA's affected programs, operations and projects included past and <br />current contracts at: NASA Headquarters, Washington, DC; Marshall Space <br />Flight Center, Huntsville, AL; Langley Research Center, Hampton, VA; <br />Glenn-Lewis Research Center, Cleveland, OH; Goddard Space Flight <br />Research Center, Greenbelt, MD; and the Jet Propulsion Laboratory, <br />Pasadena, CA. The DOD military service components of the Air Force, <br />Army and Navy, were also affected by TRW's cost mischarging schemes to <br />defraud the government. NASA's damages were identified by the NASA OIG <br />with assistance from the Defense Contract Audit Agency (DCAA) to be <br />$11,341,979, and will be returned to the Agency.<br /><br /><br />The False Claims Act permits private citizens to sue on behalf of the <br />government to recover federal funds that were obtained by false or <br />fraudulent claims. Under the Act, Bagley is entitled to receive a <br />portion of the settlement amount, with the balance of the $111.2 <br />million settlement going to the Federal Government. Bagley was a long <br />term TRW employee who had been laid off in 1993.<br /><br /><br />Special Agents of the NASA Office of Inspector General, the Air Force <br />Office of Special Investigations, the United States Army Criminal <br />Investigative Command Division, and the Naval Criminal Investigative <br />Service conducted the investigation. The DCAA, Western Region, La <br />Mirada, CA, provided audit support. David W. Long, Senior Trial <br />Attorney and Richard C. Scofield, Trial Attorney, Civil Division, <br />Commercial Litigation Branch, Washington, DC, and Susan R. Hershman, <br />Deputy Chief, and Assistant United States Attorneys David A. Ringnell, <br />Hong C. Dea, Kent A. Kawakami, and Howard F. Daniels, Civil Fraud <br />Section, Central District of California, Los Angeles, handled the <br />prosecution.<br /><br /><br />For more information on this release, please call Joe Kroener, Acting <br />Executive Officer, NASA Office of Inspector General at (202) 358-2558.<br /><br /><br />Previous Releases: None<br /><br /><br /> *** End ***<br /><br /><br />Please do not contact NASA Office of Public Affairs for information on<br />Office of Inspector General releases.<br /><br /><br />For additional information on the NASA Office of Inspector General,<br />including published reviews, audit reports, inspection/assessment reports,<br />press releases, and other publications, please access our web site at:<br />http://www.hq.nasa.gov/office/oig/hq<br /><br /><br />Report Crime, Fraud, Waste, Abuse, and Mismanagement to the NASA OIG<br />Hotline at: 800-424-9183, TDD 800-535-8134.