Emil Stache, whom Phillips & Cohen attorneys represented in his qui tam case, was a manager for Teledyne Relays in California. A Vietnam veteran, he was concerned that the company was selling unreliable weapon systems parts to the military. He filed a False Claims Act lawsuit against Teledyne, which the company paid the federal government $88 million to settle in 1994. Here is an edited version of his story as told to a Senate subcommittee in 1993.
For more than six years, I was employed as the manager of quality engineering and reliability by Teledyne Relays. Relays are electronic switches. Teledyne’s were used in the space shuttle, military satellites and in a wide array of our most sophisticated weapons systems including the Nike nuclear missile and the Patriot missile.
Because relay failures can cause any of these systems to operate improperly and cause catastrophic damage, the government pays a premium of nearly four times more for the tested, "super-reliable" military switch than it does for the untested, commercial quality relays.
When I began working at Teledyne Relays, I was responsible for overseeing the "life testing" of the relays. Life testing is supposed to demonstrate how reliable the relay is over the life of the product. The manufacturer is required to subject its relays to hundreds of thousands of operations without failure to demonstrate the reliability of its product. Every six months, the manufacturer must submit a report of its test results to the Defense Electronic Supply Center.
When I arrived, the monitoring lights that indicated whether relays were operative or had failed these test were not even hooked up. I had the test technician hook them up, and there was such a mix of red and green lights (the red lights indicating failure) that we called the test board the "Christmas tree."
I worked long and hard to correct the problems in the life test area. I complained not only to my boss, but went all the way up the chain to the vice president of quality to complain about the continual failures and to discuss whether or not such failures were being reported to the government.
As a result of my complaints, I had my responsibilities for life testing taken away from me. I continued to complain about this and other testing fraud throughout my tenure to no avail.
Then in 1988, Teledyne instituted an ethics program. The program "guaranteed" the anonymity of anyone who called in.
My previous experience with reporting testing fraud to management made me very skeptical that the hotline would produce results. A colleague, however, who was concerned about Teledyne’s testing practices, asked me if he could use my office to call the hotline anonymously. I agreed, but was not surprised when four hours later the same vice president who had removed me from the life testing area called me in and demanded to know why my colleague had called the hotline. This vice president later pleaded guilty to two counts of making false statements to the government in connection with relay testing fraud.
My complaints continued and so did Teledyne’s testing fraud. In early 1990, I was terminated for failing to sign off on relays that I knew had failed a required test.
Soon afterwards, in the spring of 1990, Al Muehlhausen, one of my co-plaintiffs in the False Claims Act lawsuit we eventually filed, learned that Teledyne was intending to send a batch of faulty relays for classified work at the government’s Sandia National Laboratory. Al called me, and together we went to the FBI.
We went to the FBI not knowing about the qui tam provisions of the False Claims Act. I believe, however, that the False Claims Act was crucial to ensuring that Teledyne was brought to justice.
After Al and I initially contacted the FBI, we hired lawyers and filed a False Claims Act suit. The False Claims Act and the qui tam provisions provided me with great confidence that Teledyne was going to be brought to justice.
We provided days and days of assistance to the FBI, other government agents and the U.S. attorney’s office by explaining how relays function, helping them understand the military specifications that government the testing of relays and deciphering the thousands of documents the government seized in the raid of Teledyne Relays.
My lawyers were instrumental in getting important information to government agents and government attorneys and understanding how Al and I could be of importance in putting the case together. The incentives the False Claims Act provided to us made us all the more willing to make the 100-mile round-trip we made on numerous occasions to FBI offices.
The False Claims Act also provided me with crucial protection by allowing me to have my own representation so that Teledyne couldn’t turn me into a scapegoat for its own fraudulent behavior. And having my own attorneys made certain that the government pushed hard for a reasonable and fair civil resolution of the case.
My attorneys also were heavily involved in assisting the Justice Department’s attorneys investigating and prosecuting the criminal case. I think even Teledyne acknowledges that my attorneys made the litigation team on this case much more effective than if only the Justice Department had been involved. This is because of my attorneys’ greater knowledge about the way relays operate, the nature of the military specifications Teledyne violated and the history of the criminal case.
The result of the hard work of the criminal team and our cooperation was that Teledyne pled guilty to 35 counts of making false statements and paid a $17.5 million fine.