Defense contractor admits obstruction, will pay $9.5M

Herley Industries Inc., based in Lancaster County, admitted to two counts of obstructing audits of bids to supply components for Navy and Air Force radar systems. Its former chairman Lee N. Blatt, 80, pleaded guilty to failing to create and maintain tax records; he was sentenced to a year's probation, community service and a $25,000 fine.

The guilty pleas came the day the case was scheduled for trial.

Prosecutors said Herley admitted that in 2001 and 2002, it gave federal auditors false information and withheld data about the cost of making some electronic components used in E-2C Hawkeye aircraft radar. They said the company admitted that the government was overcharged about $2.5 million on about $3.2 million in contracts.

"When the government is misled into overpaying for any of its contracts, ultimately, it is the taxpayers who foot the bill," U.S. Attorney Patrick Meehan said in a news release. "Contracting with the military is not a license to steal."

The company will pay a $3.5 million criminal fine and $6 million to resolve related civil claims, according to the settlement.

Myron Levy, Herley's chairman and chief executive, said settling the case saves the company time and legal fees.

"We believe this settlement to be in our best interests," Levy said in a statement.

Blatt, 80, resigned from the company in June 2006, two days after he and Herley Industries were indicted.

Herley designs and makes microwave equipment for defense, aerospace and medical use. It employs nearly 1,000 workers in seven U.S. states, England and Israel.