(Reuters) - L-3 Communications Holdings Inc was sued on Tuesday by the U.S. government, which accused the military contractor of fraudulently selling it thousands of holographic weapon sights that it knew were defective.
The sights, also known as combat optical sights, are mounted on weapons and used by special operations forces and law enforcement to target and accurately return fire in extreme environmental conditions.
Shares of L-3 fell as much as 6.1 percent after the lawsuit filed by U.S. Attorney Preet Bharara in Manhattan federal court became public, but later pared those losses.
According to the complaint, L-3 and its EOTech unit for years concealed defects that caused the sights to fail in cold or humid environments, even as they touted the U.S. military's use of their products to boost sales.
The government said EOTech has been paid tens of millions of dollars since 2004 to provide the sights to the Department of Defense, the Department of Homeland Security and the FBI.
Tuesday's lawsuit seeks civil penalties and triple damages for alleged violations of the federal False Claims Act, as well as to recoup sums paid for the defective sights.
L-3 did not immediately respond to a request for comment. In a regulatory filing this month, the company said it had set aside $26 million for a possible settlement related to holographic weapon sights.
In afternoon trading, L-3 shares were down 2.4 percent at $123.07, after earlier falling as low as $118.30.
(Reporting by Jonathan Stempel in New York; Editing by Bill Rigby)