LOS ANGELES -- Two former employees of Northrop Corp. stand to receive more than $1 million as part of a settlement the aerospace company has agreed to make as a result of civil fraud charges originally brought by the two whistle-blowers against their employer.
The company earlier had agreed to pay separate monetary damages to the two employees for wrongful termination.
Northrop agreed to pay $8 million -- most of which will go to the government -- to settle the fraud charges, brought by two former hourly employees who alleged that the corporation falsified tests on guidance devices for nuclear-armed cruise missiles, according to attorneys in the case.
The suit, filed under the federal False Claims Act, became one of the most celebrated scandals involving a major defense contractor in the 1980s, owing to the gravity of the allegations and the attention that it drew from Congress.
The Department of Justice joined the civil case against Northrop and filed criminal charges against the corporation and three of its officials.
The criminal case was settled last year when Northrop pleaded guilty to 34 counts of fraud and paid fines of $17 million.
The whistle-blowers who alerted authorities to the alleged fraud, Leocadia Brajas and Patricia Meyer, will receive between 15 percent and 25 percent of the $8 million settlement -- with the balance going to the federal Treasury, according to Herbert Hafif, the Claremont, Calif., attorney representing the two workers.
Under the False Claims Act, which allows individuals to sue contractors on behalf of the government and share in any awards, a judge must decide the amount of the whistle-blowers' shares.
Northrop signed the settlement agreement Thursday.
Department of Justice attorneys are expected to sign it in the next few weeks.
In addition to the $8 million civil fraud settlement, Northrop separately agreed to pay the workers a total of $750,000 in damages.
The two were fired after they complained internally and then reported their allegations to federal agents.
Northrop admitted in its guilty plea that flight data transmitters were improperly tested and that false data was reported to the Air Force to show that the guidance devices passed various tests.
Northrop is negotiating a separate agreement with the Air Force to replace the suspect guidance components at a cost to the company of $10 million, the Air Force said last month.
After the wrongdoing became public in 1987, Northrop voluntarily shut down the Western Services Department plant responsible for the fraud and fired the employees involved in the improper testing.
The former plant manager, Clarence Gonsalves, pleaded guilty to criminal charges.
He was sentenced to three years in prison and fined $10,000 in May 1990.
Northrop has steadfastly asserted that the flight data transmitters for the cruise missiles are "operating effectively," according to Les Daly, a Northrop senior vice president.
But in acrimonious congressional hearings last year, current and former Air Force officials testified that the devices do not meet specification and have experienced operation problems.
Northrop attorney Joseph Costello said in an interview that the $8 million figure was agreed upon after a settlement conference last December in which the Department of Justice indicated that $8 million was the lowest amount it would accept.