On June 9, 2003, the United States Government, Richard D. Bagley (the
Relator), and Northrop Grumman Space and Mission Systems Corporation
(NGSMS), the successor to TRW, Inc., agreed to a Settlement Agreement
and Release. Under the Agreement, Northrop Grumman will pay the United
States $111.2 million to settle their civil liability involving alleged
violations of the False Claims Act of 1986.

The agreement resolves two lawsuits filed in November 1994 and June
1995 by Bagley, the former director of financial control at TRW’s Space
and Technology Group, based at TRW’s Space Park facility in Redondo
Beach, California.

The complaint alleged that between the years 1990 and 1997, TRW
employees engaged in five separate schemes that increased the costs the
government paid TRW. The alleged fraudulent schemes were:

  • TRW allegedly mischarged independent research and development
    (IR&D) and bid and proposal (B&P) costs when attempting to enter the
    space launch vehicle business. TRW exceeded the government’s
    ceiling on what it paid for IR&D and B&P costs and brought forth
    these excess costs to the government;
  • TRW allegedly mischarged the costs of fabricating and testing a
    prototype satellite solar array wing as “capital equipment” rather
    than as IR&D. TRW engaged in this practice in order to avoid
    exceeding the government ceiling on IR&D expenditures;
  • TRW also allegedly engaged in similar mischarging practices with
    respect to the Universal Test Bed and the Eagle Test Bed Programs.
    TRW falsely charged the costs of their fabrication and testing as
    “capital equipment” rather than as IR&D, avoiding the government’s

  • From 1990 through 1997, TRW engineers allegedly misclassified
    private commercial automotive work when they were performing IR&D.
    This caused the government to pay the private costs resulting an
    increase in overhead and G&A costs that were applied to TRW’s
    government contracts; and
  • TRW allegedly caused the government to falsely pay for the
    development of a commercial satellite proposal to build a
    telecommunications spacecraft known as Odyssey. TRW charged the
    costs to its G&A account that caused the Government to pay most of
    those costs.

NASA’s affected programs, operations and projects included past and
current contracts at: NASA Headquarters, Washington, DC; Marshall Space
Flight Center, Huntsville, AL; Langley Research Center, Hampton, VA;
Glenn-Lewis Research Center, Cleveland, OH; Goddard Space Flight
Research Center, Greenbelt, MD; and the Jet Propulsion Laboratory,
Pasadena, CA. The DOD military service components of the Air Force,
Army and Navy, were also affected by TRW’s cost mischarging schemes to
defraud the government. NASA’s damages were identified by the NASA OIG
with assistance from the Defense Contract Audit Agency (DCAA) to be
$11,341,979, and will be returned to the Agency.

The False Claims Act permits private citizens to sue on behalf of the
government to recover federal funds that were obtained by false or
fraudulent claims. Under the Act, Bagley is entitled to receive a
portion of the settlement amount, with the balance of the $111.2
million settlement going to the Federal Government. Bagley was a long
term TRW employee who had been laid off in 1993.

Special Agents of the NASA Office of Inspector General, the Air Force
Office of Special Investigations, the United States Army Criminal
Investigative Command Division, and the Naval Criminal Investigative
Service conducted the investigation. The DCAA, Western Region, La
Mirada, CA, provided audit support. David W. Long, Senior Trial
Attorney and Richard C. Scofield, Trial Attorney, Civil Division,
Commercial Litigation Branch, Washington, DC, and Susan R. Hershman,
Deputy Chief, and Assistant United States Attorneys David A. Ringnell,
Hong C. Dea, Kent A. Kawakami, and Howard F. Daniels, Civil Fraud
Section, Central District of California, Los Angeles, handled the

For more information on this release, please call Joe Kroener, Acting
Executive Officer, NASA Office of Inspector General at (202) 358-2558.

Previous Releases: None