The US Department of Justice has issued a criminal subpoena to defense contractor Northrop Grumman Corp. seeking information about the company’s calculation of pension expenses.
The aerospace and defense company received a subpoena on Dec. 9 focusing on its financial and cost accounting controls, it said Thursday in its 10-K.
The company has been facing questions on those issues from the Defense Contract Management Agency since 2019. The agency said in 2020 that assumptions the company used from 2013 to 2019 were potentially not compliant with Cost Accounting Standards, regulations that govern cost accounting requirements for government contracts.
Northrop Grumman said in its filing that it has defended its assumptions, and that it is working with the DOJ to understand the scope of the subpoena and how to respond to it.
“We believe it is focused on the interest rate assumptions the company previously used to determine our CAS pension expense,” a company spokesperson said. Changes in interest rate assumptions could have a material effect on its financial position, but it isn’t able to estimate a range of potential loss, it disclosed.
Northrop Grumman expected to contribute the required minimum funding of approximately $100 million to its pension plans in 2022, the company said in its annual report, after not making any contributions in 2021.
In its annual report, it estimated the accumulated benefit obligation for all its defined benefit pension plans at $38.3 billion as of Dec. 31, 2021.
The company first disclosed US government questions about its pension accounting in its July 2020 10-Q.
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