Hercules Inc. said Friday it has agreed to settle a nine-year whistle-blower lawsuit with its former Bacchus Works employee Katharine A. Colunga for a total of $55 million.
Colunga's lawsuit was due to go to trial next month in U.S. District Court for Utah. The settlement ends the suit.Hercules, based in Wilmington, Del., sold its missile production unit in Magna to Alliant Techsystems, based in Hopkins, Minn., in 1995 and agreed to cap Alliant's liability in the Colunga case at $4 million.
"We are not a part of this settlement," stressed Dave Nicponski, spokesman for Alliant in Utah. "We were not the decisionmaker in this case."
In a memo issued to Alliant employees, Paul Ross, group vice president, said that even though Alliant was named in the lawsuit, "we strongly deny the allegations it contained."
Under the provisions of the settlement, which is subject to court approval, Hercules will pay $36 million to settle the Colunga case plus another $19 million to cover her attorneys' fees, expenses and costs.
Colunga, who was fired by Hercules in 1987, filed her "Qui Tam," or whistle-blower, lawsuit in 1989, charging that Hercules sold rocket motors to the U.S. government knowing that its quality assurance program was deficient.
In 1991, after two years of review, the Department of Justice declined to take over the litigation, and Colunga pursued the lawsuit with private attorneys.
In March, P. Robert Pratt, who also was fired from his team leader job at Hercules in 1995, received $900,000 of a $4.5 million settlement relating to allegations that Hercules overcharged the Navy for labor costs on contracts implementing the Intermediate-Range Nuclear Forces Treaty.
Pratt still has a lawsuit pending against Hercules and Alliant in California.
In a statement issued Friday, R. Keith Elliott, Hercules chairman and CEO, said: "We do not believe the quality of our rocket motors can legitimately be questioned. The government has repeatedly stated that it was completely satisfied with the motors we delivered and that the motors met or exceeded all requirements."
Elliott said Hercules decided to settle the case "to avoid the uncertainty of trial, which could have very large consequences, and to avoid the major costs of a lengthy and subsequent appeal by the losing party."
He said the False Claims Act, under which the lawsuit was filed, "has serious flaws" that allow triple damages in court cases even when the major customer, the government, "is clearly satisfied."
This potential outcome, he said, "could lead to companies with technology needed by the government becoming unwilling suppliers due to this kind of risk."
Hercules will take a one-time, after-tax charge of $40 million, or 41 cents per share, against its first-quarter earnings to pay the settlement.
Neither Colunga nor her Salt Lake attorney, Lon Packard, could be reached for comment by press deadlines Friday.