Prosecutors said Herley admitted giving federal auditors false information in 2001 and 2002 and withholding data on 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 statement. "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. The case had been scheduled to go to trial Monday.
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.
A federal grand jury indicted Herley Industries in June 2006 on allegations that it reaped profits of up to 300 percent on more than $3.9 million in sales for which it was the only supplier.
The indictment accused Blatt of misrepresenting the company's manufacturing costs and being behind the creation of a fake bid to justify the prices charged to the government.
Blatt resigned from the Manheim Township company two days after the indictment.
Despite the charges, Herley continued to win defense contracts.
Earlier this year, Herley announced that it had received contract awards of about $1 million from a U.S. defense contractor for microwave equipment for Air Force jets and $1.2 million from Hill Air Force Base to provide components for Air Force F-16 radar systems.
It even won a $1.3 million contract in March from Lockheed Martin to provide parts for E-2C Hawkeyes.
Last June, the federal government barred two of Herley's manufacturing sites from receiving federal contracts pending a probe of falsified test results. The ban was lifted in August after an internal investigation and the suspension of three employees.
The Navy has advised Herley that it will not be suspended or debarred from receiving contracts based on the settlement, the company said. The Navy did not immediately return a call seeking comment.
Herley's stock closed up $2.75 to $14.75 a share in trading Monday on the Nasdaq.
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.
