September 10, 1996 -- Hughes Aircraft Company has paid $4.05 million to the U.S. Treasury to settle a whistleblower lawsuit that charged the company had routinely lied about conducting important quality assurance tests of certain components used in missiles, fighter planes and other military systems.
The agreement brings to a close a False Claims Act lawsuit filed in 1990 in U.S. District Court in Los Angeles by Ruth Ann Aldred and Margaret Goodearl, two former supervisors at the company's microelectronic circuit division in Newport Beach, California.
"This completely vindicates Ruth Ann Aldred and Margaret Goodearl, who made great personal and professional sacrifices to see justice done," said Mary Louise Cohen, a Washington, D.C., attorney who represented the two women. Cohen's law firm, Phillips & Cohen, specializes in whistleblower cases.
Aldred and Goodearl first reported the fraud to government officials in 1986 because they were concerned that untested weapons might be unsafe. They were unaware of the False Claims Act and how it could be used to fight fraud until four years later.
Hughes was convicted of criminal conspiracy on the same matter in 1992 largely based on their evidence. A federal jury in Los Angeles found that Hughes had knowingly and deliberately produced microelectronic circuits, called hybrids, that had not been tested in the manner required by its contracts with the Defense Department. Some that had been tested and found defective were sold to the military without the defect being corrected. Hughes was fined $3.5 million in that case.
Hybrids, intricate packages of tiny circuits and chips, are crucial parts of the military's high-technology defense systems, including radar systems on the F-14, F-15 and F-18 fighter aircraft, guidance systems in missiles such as the Maverick, Phoenix and AMRAAM (Advanced Medium-Range Air-to-Air Missile) and the Army's communication system PLRS (Position Locating Reporting System). Failure of these parts could lead to a catastrophe.
For instance, a defective hybrid could eventually cause the radar used to direct weapons in an F-14 to fail, leaving the pilot unable to attack or defend himself or herself, testified a U.S. Air Force scientist at the criminal trial.
Aldred and Goodearl filed their civil lawsuit in 1990 under the False Claims Act, which allows private citizens to sue on behalf of the federal government companies that are defrauding taxpayers. The Department of Justice joined the lawsuit in 1992.
Both Aldred and Goodearl paid dearly for their efforts to stop Hughes from defrauding the government. When they became aware of the problems with testing procedures at the plant, they tried to bring the matter to the attention of upper management. But they were told to keep quiet and warned they might get fired if they didn't do so. In 1986, they told government investigators about the fraud.
For their efforts to stop the wrongdoing, both women suffered. They were ostracized by their co-workers and supervisors. Aldred left the company in 1988 after being relieved of all meaningful responsibilities. Hughes laid off Goodearl the following year.
Whistleblowers who file lawsuits under the False Claims Act are entitled to a share of whatever monetary damages the government recovers. "If it had not been for the False Claims Act, which encourages as well as rewards whistleblowers, these women would have been totally destroyed," said John R. Phillips of Phillips & Cohen.
Aldred, who lives outside of San Diego, and Goodearl, now of Washington, D.C., are relieved that their ordeal has ended. "Despite the toll it has taken, it was the right thing to do," said Aldred.
Aldred and Goodearl also were represented by Marron, Reid & Sheehy of San Francisco and Osborn Maledon of Phoenix.
For more information about Phillips & Cohen's record, see P&C's Successful Whistleblower Cases.
For more information, please see the following news stories:
- "Hughes Aircraft pays $4.5 million to settle false-testing lawsuit," Andy Pasztor, The Wall Street Journal, 9/11/96.
- "Two Hughes whistle-blowers to split $891,000," Henry Weinstein, Los Angeles Times, 9/11/96.
- "Hughes whistle-blowers share $891,000 from suit," Andre Mouchard, The Orange County Register, 9/11/96.
- "Hughes pays $4 million to settle 1990 whistleblower suit," Vago Muradian, Defense Daily, 9/11/96.
- "Hughes to pay U.S. $4.05 million to settle lawsuit," Dori Meinert, San Diego Union-Tribune, 9/11/96.