FOR IMMEDIATE RELEASE                                         CIV
TUESDAY, SEPTEMBER 10, 1996                        (202) 616-2765
                                               TDD (202) 514-1888


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.