Federal prosecutors have filed criminal charges against nine individuals and two defense contractors in
the investigation of Pentagon fraud, but some critics question the strength and depth of the government case that has been billed as the biggest probe of its kind in history.Six individuals, including one Navy employee, were charged Friday in a 27-count indictment with conspiracy to defraud the U.S. government, racketeering and bribery in connection with a $100 million contract for a radar system used to identify friendly units in the battlefield.
While the grand jury was meeting to hand up its indictment, three other defense industry figures and one company pleaded guilty in federal court in connection with the military procurement probe. The Hazeltine Corp. of Greenlawn, N.Y., pleaded guilty to conspiracy to defraud the U.S. government, conversion of government property and making false statements. The company, a division of Emerson Electric Co., paid a fine of nearly $2 million, including court costs.
Assistant Attorney General Edward S.G. Dennis called the indictment stemming from the 2-year-old "Operation Ill Wind" "very significant."
U.S. Attorney Henry Hudson, who directed the investigation, said there will be more indictments in the future. Asked if the probe was taking an unusually long time, Hudson said: "The pace of this investigation has been almost unprecedentedly quick," adding that prosecutors and investigators must sift through more than 1 million documents.
But the indictments and guilty pleas made public on Friday do not focus on the highest government officials or biggest contractors or consultants mentioned in search warrants, affidavits and news reports that arose during earlier stages of the probe. And a careful reading of the indictment suggests that prosecutors may have some difficulty proving at trial that, for example, bribes actually changed hands.
"I think the full-court press they waged backfired on them," said one source close to the investigation into the $150 billion Defense Department procurement business.
Richard Semen, a procurement fraud defense attorney, said he thought that the government "gambled" on more targets of the investigation offering to cooperate.
"They thought they would come in with an all-out assault and cause a stampede of people to come out of the woodwork," he said. "That was a good strategy, like bluffing in a card game, but . . . people did not cooperate."
The 86-page indictment charges that Teledyne Electronics of Newberry Park, Calif., and three men conspired in awarding of the $100 million radar contract.
Three Teledyne officers allegedly paid private consultant and former Navy acquisitions official William L. Parkin $160,000 to assist in obtaining the contract. To gain the information, according to the indictment, Parkin paid California consultant Fred H. Lackner, who paid Stuart E. Berlin, a Navy procurement specialist, "for his assistance in manipulating the procurement process to insure that the . . . contract was awarded to Teledyne."
Berlin had access to contract information and is accused of giving Tele-dyne information so it could tailor its bid to the contract specifications.
For its role, Teledyne could be forced to pay a $6.5 million fine, a figure some say is extremely low considering the amount of money the company could make through its illegal activity. The court-ordered Ha-zeltine fine of $1 million plus court costs, sources said, also is extremely low and is unlikely to act as a deterrent.
"It just becomes a cost of doing business. You put it into the hopper along with the heating and the cooling," a source familiar with the investigation said.
But Hudson maintained that the potential fine was appropriate and could serve as a deterrent.
Parkin, Lackner and Berlin could receive maximum penalties of 185 years in jail and $5.5 million in fines.
The officials allegedly defrauded the Navy and Air Force by bribing public officials in exchange for information on the military contract.