The dimensions of the Pentagon procurement bribery investigation are "beyond the wildest imagination," Sen. Charles Grassley told his colleagues Friday. Another senator called the matter the "most serious case in the history of the Department of Defense."
President Reagan said investigators waited until this week to tell him about the two-year investigation of the alleged sale of confidential Pentagon information to defense contractors through their paid consultants so that there would be no leaks. The affair came to light when search warrants were issued and telephone taps disclosed.Reagan, in an interview on Public Broadcasting Service's "Nightly Business Report," said, "I think all of that was part of the need to keep it so absolutely secret that there wouldn't be any tipping off that then might allow some wrongdoers to escape and take cover."
Reagan said he was informed "the minute they had something to tell."
Meanwhile, Rep. Bill Chappell, D-Fla., characterized as "a bunch of bunk" a report that he had come under scrutiny in the investigation.
The Los Angeles Times reported Friday that Chappell, who oversees the Pentagon budget as chairman of the House Appropriations subcommittee on defense, was identified by sources as one of two congressmen under scrutiny.
Federal law enforcement sources, speaking on condition of anonymity, told The Associated Press that no one in Congress is under investigation in the probe at this time.
The voices of several congressmen turn up on the wiretaps, which are a central part of the investigation, said other government sources, but they emphasized that the inquiry at this point has zeroed in on strong evidence of wrongdoing which has nothing to do with Congress.
The sources refused to characterize the context of any taps containing the voices of congressmen, to say in how many instances that occurred, how many congressmen were involved or whether the conversations were incriminating in any way.
A company in Chappell's congressional district, Armtec Inc. of Palatka, Fla., is one of 15 defense contractors whose offices were searched by FBI agents Tuesday.
Armtec's president, William W. Roberts, is a personal friend of Chappell. He said his company "is not aware of any wrongdoing" and will cooperate with investigators.
After getting a briefing from U.S. Attorney Henry Hudson, who is coordinating the massive investigation, Grassley, an Iowa Republican, said the probe "involves people enriching themselves on proprietary information."
In a Senate speech, Grassley said the scandal is "widespread, beyond the wildest imagination of what's going on."
CBS News, citing an unidentified administration official, reported Friday that seven Defense Department employees are suspected of accepting bribes or gifts in return for inside information on Pentagon contracts.
And ABC News reported that unidentified officials said the payoffs run into millions of dollars in cash in addition to gifts and cars.
Some 200 subpoenas have been issued this week for grand jury appearances, said federal law enforcement sources, speaking on condition of anonymity.
Grassley, a dogged investigator of Pentagon contracting procedures, called for restrictions to discourage the revolving-door syndrome in which Pentagon officials go to work in lucrative consulting jobs for defense contractors.
At the center of the investigation is former Pentagon official Melvyn Paisley, whose office was bugged and telephone tapped in a two-year investigation. He was a Boeing executive before going to the Pentagon and became a defense consultant upon leaving.
Also being looked at is retired four-star Adm. James A. "Ace" Lyons, who sources say was a colleague of Paisley's. Lyons is not accused of any wrongdoing, but a warrant authorizing a search of McDonnell Douglas Corp. offices in St. Louis sought, among other things, documents "relating to the work of Ace Lyons for McDonnell Douglas from December 1987 through 1988."
Sen. John Warner of Virginia, a former Navy secretary and the ranking Republican on the Senate Armed Services Committee, said in a television interview the investigation presents "the most serious case in the history of the Department of Defense."
He called it "the most widespread case I or anyone else has ever seen because you've got literally dozens upon dozens of contractors . . . and literally hundreds and hundreds of people are now being subpoenaed."
Vice President George Bush called reporters into his office and read a statement about the situation. "Corruption anywhere in government is bad enough, but these people, should the allegations prove true, were not just stealing money from the Treasury, they were stealing from our national defense and undermining our national security," Bush said.
Grassley called for more vigorous enforcement of antifraud laws and for use of regional task forces of federal prosecutors to fight white-collar crime in concentrated defense industry areas such as southern California and Texas.