FOR IMMEDIATE RELEASE                                         CIV
MONDAY, FEBRUARY 26, 1996                          (202) 616-2765
                                               TDD (202) 514-1888

                                 
           PHILIPS ELECTRONICS PAYS U.S. $65.3 MILLION
         FOR SELLING FAULTY ELECTRONIC PARTS TO MILITARY

     WASHINGTON, D.C. -- Philips Electronics North America
Corporation will pay the United States $65.3 million to settle
claims Philips sold improperly tested capacitors and resistors to
the government for a number of military and aerospace programs,
the Department of Justice announced today.
     Assistant Attorney General Frank W. Hunger, head of the
Civil Division, said the settlement was one of the largest ever
involving allegations a defense contractor sold electronic
components to the government that failed to meet military
specifications.  
     "This settlement reflects our continuing efforts to ensure
the integrity of the military procurement process," Hunger said. 
"It sends the message to all government contractors that they
will be held accountable for the quality of their work.
     "The Civil Division is grateful for the invaluable
assistance of the investigators, auditors and agency attorneys
who worked with us," said Hunger.  "I especially want to thank
the United States Attorney's office in Fort Worth, which worked
closely with the Civil Division in investigating and negotiating
the Texas claims."       
     The settlement involves capacitors sold from 1983 through
1992 by Philips' Tantalum Capacitor Operation, which was
headquartered in Jupiter, Florida, and resistors sold by Philips'
Mineral Wells, Texas, facility in the same period.  Resistors and
capacitors are key electronic components in a number of military
and aerospace systems, including aircraft, missiles, satellites
and radar systems.  The Department said the government was not
aware of any field failures of such systems attributed to
Philips's resistors and capacitors.
     Between 1983 and 1992, Philips sold millions of dollars
worth of capacitors and resistors, many of which were required to
be manufactured and tested in accordance with detailed military
specifications.  The government purchased many of these devices,
either directly or indirectly through third parties such as
distributors and equipment manufacturers.  
     In today's settlement, Philips admitted that "in a
significant number of instances" its Florida facility falsified
test reports for capacitors and failed to report when the
capacitors failed tests.  Philips also admitted that certain
assembly and testing processes that were required to be performed
in its Florida facility actually were performed in a factory in
the Dominican Republic.  
     Philips' sale of non-conforming capacitors was the subject
of a 1992 report the company submitted to the Department of
Defense's Inspector General's Office under the Department's
Voluntary Disclosure Program.  Philips has paid the government
$9.6 million in connection with that disclosure and Philips will
receive a credit for that amount under today's settlement.
     Philips also admitted that its Texas facility sold resistors
that were tested improperly, falsified some resistor test results
and failed to report resistor test failures.  Last June, Philips
pleaded guilty to 18 criminal counts in connection with these
claims and paid the government $9 million in criminal fines.
Those fines are not included in today's $65.3 million civil
settlement. 
     Today's settlement resolves claims the United States could
have brought against Philips under the False Claims Act, which
provides that anyone who knowingly submits false claims for
payment to the government is liable for treble damages plus a
$5,000 to 10,000 penalty for each false claim submitted.  
     The agreement also settles claims the government could have
raised under the Lanham Act, which protects trademarks and other
marks.  Many of the resistors and capacitors sold by Philips bore
the "JAN" certification mark as an indication they were made and
tested in accordance with military specifications.  "JAN," which
stands for "Joint Army Navy," is a certification mark that has
been owned by the government since 1948.  In today's settlement,
Philips admitted its use of the mark in connection with items
that were improperly tested violated the Lanham Act.
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96-068