FOR IMMEDIATE RELEASE

CIV (202) 616-2765

THURSDAY, FEBRUARY 19, 1998

UNITED STATES JOINS FALSE CLAIMS ACT CASE AGAINST TRW INC.

WASHINGTON, D.C. -- The United States has intervened in a qui tam suit accusing TRW Inc. of unlawfully boosting its profit on federal contracts through several related cost mischarging schemes, the Department of Justice announced today. Assistant Attorney General Frank W. Hunger of the Civil Division and Nora M. Manella, U.S. Attorney in Los Angeles, California, said the United States' intervention involved two of eight claims contained in the qui tam complaint filed by Richard D. Bagley, former director of financial control at TRW's Space & Technology Group in Redondo Beach, California. The Department alleged that from 1990 through early 1992 TRW falsely mischarged to the government independent research and development (IR&D) and bid and proposal costs associated with its attempt to enter the space launch vehicle business. If TRW had correctly accounted for those costs, the Department said, the government would not have reimbursed TRW because in each of those years TRW exceeded the contractual ceiling on expenditures for which the government had agreed to reimburse TRW. The second claim alleged that from 1990 through at least 1995 TRW engineers at the company's Space Park facility in Redondo Beach falsely misclassified work for TRW's automotive businesses as "long-range marketing" when, in fact, the work was IR&D. By classifying the work as long-range marketing, however, TRW reduced the costs charged to its automotive groups which, in turn, raised the overhead rates paid under the government contracts. The Department also said the government's complaint, which will be filed later, will allege that TRW mischarged the United States for the cost of fabricating a prototype satellite solar array wing. TRW wrongly charged the costs to an account for the fabrication of capital equipment rather than to its IR&D account in seeking full government reimbursement of those costs, the Department said. "This suit is a signal to government contractors that the Department will investigate and pursue those entities that mischarge the United States and attempt to hide those mischarges through the use of artful accounting procedures," said Hunger. "The United States negotiates in good faith and expects the same from those with whom it deals." Under the qui tam provisions of the False Claims Act, a person with knowledge of financial fraud against the government is authorized to file suit against the alleged wrongdoer on behalf of the government. Subject to certain statutory provisions, if the law suit results in a monetary judgment or settlement, the person is entitled to a share of the proceeds. Bagley's suit was filed in U.S. District Court in Los Angeles. #####

98-070