A top Navy official whose phone was tapped in the massive Pentagon bribery probe has begun cooperating with prosecutors, and a report published Thursday says his former boss allegedly had secret defense documents smuggled out of the Pentagon.

Deputy Assistant Navy Secretary James Gaines, whose office was searched last week, has begun telling prosecutors what he knows, sources familiar with the investigation said Wednesday evening.The Los Angeles Times reported Thursday that investigators believe Gaines was a principal supplier of Pentagon documents to defense consultant Melvyn R. Paisley, who was assistant secretary of the Navy and Gaines' boss until April 1987.

The Times, quoting government sources, said Paisley allegedly arranged an elaborate scheme under which high-level Pentagon officials smuggled classified documents out of the Pentagon and allowed him to copy them with the aid of his wife.

The newspaper said Paisley passed the sensitive information to McDonnell Douglas Corp., which retained him as a consultant shortly after he left the Pentagon. A source told the Times that Paisely received "staggering fees" from the company.

The 2-year-old investigation focuses on allegations that private consultants, many of them former Pentagon employees, paid bribes to obtain Defense Department secrets about upcoming contracts.

Gaines made an appointment to hire a Washington-area defense lawyer, but then abruptly canceled the meeting after getting a call from a federal investigator who told him that "you have until 9 a.m. tomorrow to decide whose side you're on," according to one source. Gaines decided several days ago to cooperate, said the sources.

While Gaines is talking with prosecutors, another Pentagon official whose office was searched, Victor Cohen, is negotiating with the government on whether to do the same, said the sources, speaking on condition of anonymity.

After a meeting with the chief prosecutor in the probe, one of the Pentagon's strongest supporters in the Senate said "people will really be shocked" by the scale of wrongdoing involved.

"It appears they have very good evidence," Sen. Strom Thurmond, R-S.C., said after being briefed by Henry Hudson, the U.S. attorney for eastern Virginia.

Both Gaines and Cohen had key procurement jobs in the Pentagon. Gaines was deputy assistant Navy secretary for acquisition management while Cohen was deputy assistant Air Force secretary in charge of buying tactical command, control, communications and computer systems. Both men have been reassigned since the investigation became public.

While Hudson was describing the case to congressional leaders on Wednesday, former Defense Secretary Caspar Weinberger was defending his Pentagon management style and warning against public and congressional overreaction to the disclosures.

"No matter how careful you are, you're not going to be able to eliminate dishonesty," Weinberger said in an interview with The Associated Press.

Hudson told congressional leaders in closed meetings that 75 to 100 contracts worth "tens of billions of dollars" are under scrutiny, according to Rep. John Dingell, D-Mich.

Sen. John Warner, R-Va., ranking Republican on the Armed Services Committee, said after hearing Hudson that "these contracts may have to be examined to determine if they were in fact tainted by these allegations."

Hudson told reporters that there may not be any indictments until after the Nov. 8 election.

"I'm hopeful that if indictments are appropriate in the case, they will be secured by the end of the year," the prosecutor said. "If we can proceed at a faster pace, we'll attempt to do it."