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Defense Contractor To Pay $6 Million in Settlement

February 19, 1988

CLEVELAND (AP) _ Eaton Corp. has paid $6 million to settle government claims that one of the company’s divisions overcharged and issued premature bills on defense contracts, the company announced.

The government had alleged that Eaton issued $2.7 million in premature bills and about $1 million in improper charges. The government had been seeking triple damages and penalties totaling more than $26 million.

The settlement, which includes a $500,000 penalty for entertainment furnished by Eaton’s Airborne Instruments Laboratories division and $700,000 in penalties for its billing practices, was announced jointly in statements Wednesday by Eaton Chairman James Stover and Andrew Maloney, the U.S. attorney for the Eastern District of New York.

AIL, in Deer Park, N.Y., was accused of making false statements in its monthly billings to the Air Force during work on the defensive avionics system for the B-1B bomber.

Eaton said the AIL division had government contracts of $3 billion during the period covered by the settlement.

″A settlement of these claims is a prerequisite to our moving ahead with plans to exit the defense electronics industry,″ Stover said. ″On that basis, we think the settlement is in the best interest of Eaton shareholders.″

Cleveland-based Eaton announced last October its intention to sell its defense electronics business.

As part of the settlement, Eaton agreed to absorb its own legal fees and expenses, Maloney said.

″The defense contractors must realize that they have to abide by the rules, and failure to do so will result in substantial penalties and losses to the companies involved,″ the prosecutor said.

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