News Article

HBT Whistleblower Gets $48.8m Reward

False compound semiconductor device reliability claims are at the center of one of the largest US defense fraud settlements ever.

Northrop Grumman has reached a $325 million agreement to compensate the US government for a cover-up concerning faulty transistors deployed in reconnaissance satellites.

The HBTs, produced by GaAs pioneer TRW between 1992 and 2002, were supplied to the US National Reconnaissance Office (NRO) and involved in critical failures on an orbiting satellite in 2001.

Several other government programs then delayed the launch of their satellites, eventually replacing any of the affected HBTs that they had used.

Robert Ferro, a researcher at The Aerospace Corporation, discovered in 1995 that the HBTs in question were likely to fail under high electrical current operation.

After TRW tried to conceal his findings Ferro went it alone, suing the company in the California courts under the US False Claims Act. He initiated the suit in 2002 "“ the same year that Northrop Grumman acquired TRW.

The US government begun investigating the case in 2003, eventually finding that TRW had failed to properly test and qualify its HBTs. TRW had also integrated defective HBTs into NRO satellite equipment, then misrepresented and concealed reliability information, the government found.

Having drawn these conclusions, the government joined Ferro s suit in November 2008 and then announced the $325 million out-of-court settlement with Northrop Grumman on April 2.

The False Claims Act requires the US government to give the whistleblower in such cases between 15 and 25 percent of what it recovers. In this case Ferro, who is also on the organizing committee of the Reliability of Compound Semiconductors Workshop, gets $48.75 million.

“Today s settlement is the largest one ever paid by a defense contractor in a whistleblower case and the second largest settlement ever involving defense contractor fraud," claimed Philips and Cohen LLP, Ferro s law firm.

Just a month before the satellite problems began emerging, the law firm says, TRW also concealed from the government a massive recall of cell phone equipment using similarly defective HBTs.

It also says that TRW sanitized a report from Aerospace Corporation commissioned by the US Air Force, in which Ferro tried to include his 1995 results. Not only did TRW remove that work, it also removed references to other warnings it had received about its HBTs.

However, Northrop Grumman still denies any wrongdoing and will not ultimately make any payment to the US government. Instead it has agreed to settle an outstanding $1 billion claim it had against the government for a missile program cancelled in 1995 for $325 million. The missile claim and the HBT claim therefore entirely offset each other.

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