James Neal Blue and Linden Stanley Blue have much in common. Both graduated from Yale University, both were Air Force pilots, both went into business, both made a fortune, both live in La Jolla mansions, both bought General Atomics in August 1986, and both now run the company, Neal as chairman and Linden as vice chairman.

The Blue brothers derived their wealth from “gas utility companies in Ohio, Utah, Colorado, and Wyoming, oil and gas production in Canada, and real estate in Colorado,” according to a company news release.

The ability to make money was apparently inherited. Their mother, Virginia Neal Blue, was a woman of substantial accomplishments. A website featuring a “Colorado State Capitol Virtual Tour” reveals a stained-glass portrait of her and describes her as a Colorado native who “spent most of her life becoming an accomplished financier and realtor. In 1962, she was elected the first female Denver Realtor of the Year and soon she became the first female president of the University of Colorado Associated Alumni. In 1967 Blue was elected to the post of Colorado State Treasurer, the first woman to hold the position. In this official capacity Blue improved banking and investment practices in the state, and when she left three years later the state was left with an extra eight million dollars.”

Her sons bought General Atomics for $50 million from Chevron Oil, and they set out to enlarge its federal contracting business. To further this end, they became big contributors to both Republicans and Democrats, being especially generous with our local congressional delegation, which returned the favors by working hard to secure appropriations for research. The company diversified from its traditional base as a center for nuclear research and development, one of the most significant steps being the purchase of the rights to the Predator from the bankrupt Israeli national who invented the aircraft. The Predator is an unmanned aircraft that has played a significant role in Bosnia, Afghanistan, and Iraq. It is used for gathering intelligence with television cameras and for delivering lethal firepower with Hellfire missiles.

Besides the Predator, General Atomics contracts with the Department of Defense to provide Navy power systems, guidance devices, and computer integration. It owns uranium mines in Australia, does research for the government’s nuclear fusion project, and is involved in top-secret projects with the Pentagon.

General Atomics has recently had another job: defending itself against charges of defrauding taxpayers of millions of dollars by rigging contracts, padding payroll costs, and presenting false claims for payment using a company owned by the sons of Neal Blue. Sam Kholi, a former employee of General Atomics, triggered a federal action using the False Claims Act, a Civil War–era statute that enables citizens to bring whistle-blower lawsuits on behalf of the United States against contractors alleged to have cheated the government. The whistle-blower can collect a bounty, up to 30 percent of the funds awarded as a result of the suit. The government can also choose to intervene in the suit, as it has done in this case.

“Although the General Atomics defendants have more than 1000 employees, they have the need for additional staffing from time to time to work on specific contracts,” says the Kholi complaint. “The vast majority of these additional staffing needs are for engineers and scientists who have worked on specific contracts for the General Atomics defendants in the past. Other staffing needs are more general and administrative in nature.

“Until 1992, the General Atomics defendants would obtain this additional staffing via competitive bidding from staffing agencies. At any given time, the General Atomics defendants would be receiving their additional staffing from 7 to 8 staffing vendors.”

But that was before the two sons of Neal Blue — Linden P. Blue and Neal Karsts Blue — set up Alliance Staffing Associates, Inc., a temporary-employment firm based in Mira Mesa, in 1992. Kholi alleges that after the creation of Alliance, “the staffing was provided at exorbitant rates far above competitive market rates. Rather than provide staffing at its cost plus the standard 20 percent mark up, Alliance Staffing Associates, Inc., had a conspiratorial incestuous agreement with General Atomics defendants to charge its cost plus an outrageous mark up of up to 30 percent.

“These above-market costs were then passed on through to the government by the General Atomics defendants in their government contracts, to the government’s damage. The government has been further damaged by this practice because the General Atomics defendants would then add their own profit percentage to these already inflated costs in their government contracts.

“These inflated costs were nothing more than a subterfuge to steal money from the United States and pass it on through to the sons of Neal Blue.”

General Atomics denied wrongdoing.

Last April the case went before the U.S. District Court, and on June 13 the court sided with General Atomics on all claims. The government’s motion to alter this judgment was denied on August 13.

Gathered from: http://www.sandiegoreader.com/news/2003/sep/18/all-family/?page=4&;