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Justice Department Charges TRW in Alleged Overcharges

June 23, 1986

CLEVELAND (AP) _ The Justice Department on Monday accused TRW Inc. of overcharging the government for military parts, and sent other allegations against the company to the Defense Department for further investigation.

In addition, U.S. Attorney Patrick M. McLaughlin said his office was continuing a criminal investigation into the alleged overcharging by the defense contractor.

The government made its charge against TRW in an amended complaint to a civil lawsuit filed in April by three former TRW workers, who were fired in 1984 because of the alleged overcharging in two TRW divisions.

The government earlier this month took over the suit, which was filed under the seldom-used federal False Claims Act, a Civil War era-law enacted to halt profiteering.

The original antitrust lawsuit charged that TRW had conspired to fix prices and restrict competition for military aircraft parts.

Government attorneys on Monday said they were dropping the antitrust allegations because of insufficient evidence at this time. As a result, the other three defendants in the case were also dropped.

Dismissed as defendants were General Electric Co., United Technologies Corp. and Iscar Blades Ltd., Israel’s prime defense contractor. TRW is a major shareholder in Iscar Blades.

The Cleveland-based TRW said in a statement that it was ″gratified by the Justice Department’s decision to drop all antitrust, price-fixing and conspiracy allegations.″

TRW said it had been cooperating with the government since disclosing to in November 1984 what it called ″accounting irregularities.″ Company spokesman Michael Johnson said the company was prepared to make restitution.

The original suit sought $1.2 billion in damages, but the amended complaint did not specify an amount. McLaughlin called the $1.2 billion figure ″highly speculative.″

The government on Monday also asked that action on the civil suit be suspended because of the likelihood of a negotiated settlement, the investigation by the Defense Department and the criminal investigation.

Assistant U.S. Attorney Alan J. Ross said the amended complaint detailed ″two relatively complicated schemes to defraud the United States on military contracts″ by two Cleveland-based TRW divisions, the Compressor Components Division and the Power Accessories Division.

He said Compressor Components, which makes parts for jet engines, allegedly kept two sets of cost figures. The division allegedly ″used the undisclosed cost system to determine its prices, then fraudently altered its disclosed cost records to support inflated prices to the government,″ he said.

Power Accessories, which makes parts for nuclear reactors for military vessels, allegedly susbstituted costs on one contract for another contract, Ross said. This scheme, he said, prevented cost overruns from occurring.

Ross said some of the former employees’ allegations were sent to the Defense Department’s Inspector General’s Office.

If the allegations have merit, Ross said, ″We would expect to fold them back into the amended complaint at some future date.″

The fired TRW employees who filed the original complaint were accounting manager Larry S. Eagleye, former company engineer Charles W. Broome and former company accountant Alan J. Russ. In April, the attorney for Broome and Russ said the employees did not set the policies that led to their firing.

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