CIV 202 616-2007

WASHINGTON, D.C. -- The Department of Justice said Parker Hannifin Corporation, a major defense industry contractor, paid the United States $7.8 million today to settle claims the firm's Parker Bertea Aerospace Group in Irvine, California, mischarged the government for overhead on about 70 defense contracts. Assistant Attorney General Frank W. Hunger, in charge of the Civil Division, said the government's investigation stemmed from disclosures Parker Hannifin made to the Department of Defense in May 1988 that the Control Systems Division of its Aerospace Group mischarged overhead accounts. The disclosures were made pursuant to the DOD's Voluntary Disclosure Program. The charges were allocated as a shared cost to all of Parker Hannifin's government contracts for work that should have been charged directly to specific contracts. According to the company's disclosure, the total cost impact to the government was $2,515,200. An investigation by the Defense Criminal Investigative Service, however, revealed that the disclosure was not correct in several respects. Hunger said the government's investigation showed that because Parker Hannifin inflated its indirect costs the cost and pricing data it provided to the government in subsequent contract negotiations also were inflated and incorrect. As a consequence, the company used inflated cost and pricing data in negotiating approximately 70 subsequent contracts with DOD, resulting in the company receiving higher contractual payments than it was entitled. "Just because defense expenditures have begun to lessen," Hunger noted, "that does not mean the Department of Justice will be any less relentless in its pursuit of those who would defraud the Department of Defense for their own benefit." Parker Hannifin manufactures equipment for many of the largest DOD aerospace prime contractors, as well as for the government itself. The voluntary disclosure program encourages defense contractors to inform the government of potential civil or criminal fraud matters in their contractual relationships with DOD. The disclosures are made with no promises regarding potential civil or criminal action by the Department of Justice. As part of the disclosure process, a company can conduct an internal investigation, which is subject to the government's review, verification and investigation. Hunger said, "It is critical that when a contractor participates in the voluntary disclosure program it fully and accurately discloses the extent of any violations." Today's settlement resolves claims the government could have brought against Parker Hannifin under the False Claims Act, which permits the government to recover three times the amount of its actual loss plus civil penalties of $5,000 to $10,000 for each false claim. ##### 94-527