Justice, Northrop Grumman tentatively settle shipyard suit

The Department of Justice and Northrop Grumman Newport News have reached a tentative settlement in a lawsuit against the shipyard seeking at least $216 million in damages and penalties.

The case, filed in U.S. District Court in February, is one of the largest active cases against a defense contractor. It accuses the shipyard of false claims and unjust enrichment by improperly charging the Navy for work on double-hulled commercial tankers in the 1990s.


Federal authorities assert that between 1994 and 1999, despite warnings from its auditor, Arthur Andersen, the shipyard billed costs associated with developing a now-defunct double-hulled oil tanker program to a general account called Independent Research and Development.

That account is designed for basic research, applied research, development and concept formulation. The government partially reimburses the shipyard for such general research costs as part of its Navy contracts, but prohibits direct work to be billed to that account. But the Justice Department said the shipyard did so anyway.


The department said the government was defrauded of $72 million. The lawsuit sought triple that amount, $216 million, plus penalties and costs, as allowed under the False Claims Act.

The case had been scheduled to go to trial Aug. 18 in Alexandria, Va., but has been taken off the docket, the Alexandria clerk's office said yesterday.

The settlement agreement was reached by lawyers from both sides, and approved last week by the Justice Department in Washington. After a court hearing a week ago, Judge T.S. Ellis III sent notice to the court clerk that the case had reached a settlement agreement, the clerk's office said.

Lawyers are tying up some of the loose ends before the agreement can be entered into the official court record. The final paperwork would include the dollar amount of the settlement.

"The lawyers are still working out some of the little details," said Deanna Warren, a spokeswoman with the U.S. Attorney's Office in Norfolk, which worked on the case.

Charles Miller, a spokesman with the Justice Department in Washington, declined to comment yesterday on the agreement. The department's Washington office had been working on the case with U.S. Attorney Craig Paul Wittman of the Norfolk, Va., office.

Northrop Grumman Newport News spokeswoman Jennifer Dunn also declined to comment, saying the legal case remains open. The shipyard's law firm on the case, Fried Frank Harris Shriver & Jacobson of Washington, did not return a telephone call seeking comment.

The Daily Press of Newport News, Va., is a Tribune Publishing newspaper.