BETHPAGE, N.Y. -- Grumman Corp. announced Tuesday it has reached a $20 million settlement with the federal prosecutors, averting criminal charges of defrauding the Navy.
Grumman said it had already established reserves for the settlement, so current earnings will not be adversely affected.
The settlement ends a five-year criminal investigation of the company that was part of a nationwide Pentagon corruption probe dubbed Operation Ill Wind. Former Grumman Chairman John O'Brien previously pleaded guilty to felony charges stemming from the probe.
Grumman said the settlement with the U.S. Attorney in Brooklyn covers charges of improper conduct by former company employees in business relationships with the late James T. Kane of Baldwin, N.Y.
Grumman said it fully cooperated with the government and said the $20 million reimburses the government for payments it contends were made as a result of favoritism and other improper business conduct which occurred between former Grumman employees and Kane-related companies prior to July 1990.
In August, reports emerged that senior officials at the U.S. Justice Department's criminal division were reveiewing recommedations from prosecutors to seek felony charges against Grumman.
The Wall Street Journal reported at that point that prosecutors were considering seeking such charges not only for dealings with NASA and for Navy contracts back to the late 1980s and influence-peddling by O'Brien, who was convicted last fall.
The settlement includes a number of provisions that mandate extensive involvement by federal agencies in Grumman's internal compliance efforts. A Grumman spokesman said he could not comment on whether the provisions are broader than those imposed on other companies involved in the Ill Wind probe.
Grumman agreed to disclose to the Brooklyn federal prosecutor's office and to the Department of Defense any allegations or information its vice president of audit and ethics concerning criminal conduct that may materially affect a government contract.
Buyers in the aircraft systems group must be rotated on a periodic basis to prevent development of close or long-term relationships between buyers and suppliers.
