1.1 Case analysis module: hughes aircraft  (Page 3/4)

False Claims Act (31 U.S.C.§§3729-3733) becomes False Claims Reform Act of 1986

making it stronger and easier to apply

6. Oct. 1986 Paul/Baker report problems to American management, and,

after the problems were not fixed, Paul/Baker reported the

allegations of faulty testing to the United States Department of Defense

7. Jan. 9, 1987 Earliest date that American may have stopped neglecting environmental

screening tests

American Timeline

I. Criminal Suit

a. 1998 Baker leaves American feeling that her job had been stripped of all real responsibility

b. Mar. 1989 Paul is laid off from American

1995 Paul and her husband are divorced

II. Civil Suit: United States of America v. American Aircraft Co., and Tim Clark

a. Dec. 13, 1991 after a lengthy investigation, the U.S. Department of Defense

charges American and Tim A. Clark (Clark) with a 51-count

indictment accusing it of falsifying tests of microelectronic circuits (criminal suit)

b. Jun 15, 1992 American found guilty of conspiring to defraud the U.S.

Government in criminal case, co-defendant Clark

acquitted following 4-week trial, Paul/Baker called as

witnesses in trial, American appeals

c. Oct. 29, 1992 American fined $3.5 million in criminal trial decision

d. Dec. 2, 1993 Appellate court upholds 1992 criminal conviction and sentence,

American appeal fails

Scenario 1:

Frank Saia has worked at Hughes Aircraft for a long time. Now he is faced with the most difficult decisions ofhis career. He has been having problems in the environmental testing phase of his microchip manufacturing plant; the detailednature of these tests has caused Hughes to be consistently late in delivering the chips to customers.

Because of the time pressure to deliver chips, Saia has been working to make the production of chips moreefficient without losing the quality of the product. Chips are manufactured and then tested, and this provides two places wherethe process can bottle up. Even though you might have a perfectly fine chip on the floor of the plant, it cannot be shipped withouttesting. And, since there are several thousand other chips waiting to be tested, it can sit in line for a long time. Saia has deviseda method that allows testers to put the important chips, the“hot parts,”ahead of the others without disrupting the flow and without losing the chips in the shuffle. He has also added a“gross leak”test that quickly tells if a chip in a sealed container is actually sealed or not. Adding this test early in the testing sequenceallows environmental testing to avoid wasting time by quickly eliminating chips that would fail a more fine-grained leak testlater in the sequence.

Because environmental testing is still falling behind, Saia’s supervisors and Hughes customers are getting angry and have begun to apply pressure. Karl Reismueller, thedirector of the Division of Microelectronics at Hughes, has given Saia’s telephone number to several customers, whose own production lines were shut down awaiting the parts that Saia has had troubledelivering. His customers are now calling him directly to say“we’re dying out here”for need of parts.