THE UNITED STATES

Scandal at the Pentagon

MARCUS GEE July 11 1988
THE UNITED STATES

Scandal at the Pentagon

MARCUS GEE July 11 1988

Scandal at the Pentagon

THE UNITED STATES

The members of the U.S.

House Armed Services Committee were clearly angry. They had summoned senior Pentagon officials to testify about widespread fraud and bribery in the system of awarding military contracts.

But defence department general counsel Kathleen Buck said that even the Pentagon did not have details of the continuing two-year-old investigation by the Federal Bureau of Investigation and the Naval Investigative Service. And Undersecretary of Defence Robert Costello said that he could not identify the contracts involved—apparently worth tens of billions of dollars. Clearly exasperated, Colorado Democrat Patricia Schroeder stared at Costello and said, “You drive me crazy.”

But if the Pentagon did not know who the alleged culprits were, the courts knew about some of them. On June 30, an affidavit unsealed in the Dallas federal district court showed that the Continental Electronics division of Varian Associates Inc. was under investigation. And the next day,

Defence Secretary Frank Carlucci suspended payment on contracts with Varian and three other companies worth a total of $1.2 billion. He also announced that suspension proceedings had been initiated against three individuals named in the affidavit. That document disclosed that FBI agents had listened in by phone tap as U.S. navy procurement officer George Stone passed vital contract information—allegedly for payment—to a consultant, Mark Saunders, who had been his predecessor at the Pentagon. The affidavit said that Saunders told Joe Bradley, a Varian vice-president, that he would advise the navy in a way that would steer contracts to the company. Still, the Varian case was only part of the affair, which is reported to include as many as 50 defence consultants, 20 Pentagon officials and 15 of the country’s biggest arms contractors.

No one has yet been charged, but the extent of the scandal—already called the worst in Pentagon history by former navy secretary Senator John Warner of Virginia—was not in doubt. Because of that, said Buck, the Pentagon might be forced to reopen

between 75 and 85 weapons contracts. Declared Senator Sam Nunn, the Georgia Democrat who chairs the Senate Armed Services Committee: “Such greed and bribery can compromise our nation’s security.”

There was a possibility that Canadian defence might also be affected. Among the companies reportedly under investigation are McDonnell Douglas Corp., which produces the F/A-18

jet fighter, and Unisys Corp., which makes components of shipboard weapons systems. The Canadian Air Force has purchased 137 F/A -18s, called the CF-18 in Canada. And Ottawa has awarded Paramax Electronics, a wholly owned subsidiary of Unisys, a $1.25-billion contract as the primary subcontractor for a high-tech weapons system for six new frigates.

Congressional investigators have pressed hard for details of the tainted contracts. But Costello told the House Armed Services Committee that he simply did not have them. Declared committee chairman Les Aspin, a Wisconsin Democrat: “What we’re looking at is a potentially serious grid-lock over the question of what to do with tainted contracts.” Earlier, Carlucci said that the Pentagon would not necessarily wait for convictions before moving against contractors. He added, “If we have sufficient evidence that a contract is tainted, we will take action.”

But many defence experts said that the weapons systems in% volved in the scandal play such a major role in national defence that it will be impossible to withdraw them or reopen contracts for new bids. Instead, Pentagon sources said, contractors may be fined and suspended from new defence work for a period of months. Meanwhile, some congressmen are pushing for swift changes in the system of awarding contracts. But Costello defended the Pentagon contracting system at last week’s hearings, blaming the abuses on the greed of a few individuals. And even if the procurement system were overhauled, said Pentagon attorney Buck, the defence department would be hindered by lack of details about the crimes.

But the full details may never be known. U.S. Attorney Henry Hudson, the chief prosecutor in the case, disclosed last week that in several instances people implicated in the scandal have destroyed documents. And that was yet another setback for those who are seeking quick answers about the Pentagon’s underground scandal.

WILLIAM LOWTHER

-MARCUS GEE with WILLIAM LOWTHER in Washington