Northrop Sued by Holder Over Alleged Abuses

Citing several allegations of criminal business practices, a Northrop shareholder Thursday sued the giant Los Angeles defense firm and 33 of its directors and executives for abusing their corporate responsibility and wasting company assets.

In addition, the suit, filed in Los Angeles Superior Court, alleges that the executives and directors, including Chairman Thomas V. Jones, reaped nearly $13.1 million in illegal Northrop stock profits by selling shares before the alleged improprieties were publicly exposed.

As a result of the alleged criminal acts, the suit charges that Northrop has been forced to seek a private infusion of $450 million because the company cannot meet the strict disclosure for public offerings required by the Securities and Exchange Commission.

First Shareholder Suit

The suit seeks a court order requiring the defendants to repay Northrop all their compensation for as many as the past 10 years as well as reimburse the company for the damages they inflicted. The amount of reimbursement sought was not specified. In addition to the directors and executives, the suit also names two former company employees and three company-retained consultants as defendants.

A Northrop spokesman said the suit “appears largely to be a recitation of newspaper articles on various assertions that already are under investigation by Northrop or the government with Northrop’s cooperation.” The statement concluded: “Some of the matters are already in litigation.” The suit is the first by a shareholder against Northrop since the defense contractor became the subject of several continuing investigations into allegations of bribery, corruption, falsifying test data on nuclear missiles and filing false billings to the Pentagon.

The allegations in the class-action suit filed by shareholder Gabrielle U. Mayran, include:

The company’s payment of millions in bribes to South Korean officials in an attempt to win a sale of its F-20 Tigershark fighter.

The creation of dummy corporations to purchase non-complying parts for the MX missile guidance system and the falsification of test data and time cards to hide the purchases.

The hiring of defense industry consultants William Galvin and William Parkin, who are both under investigation for bribing Pentagon officials for secret defense information.

The suit also charges that while the defendants were engaged in the illegal acts, about 20% of them sold some or all of their shares in the company, reaping profits totaling nearly $13.1 million. The suit says the defendants sold 311,545 shares at prices as high as $52