Defense Secretary Frank Carlucci froze new payments Friday on more than $1 billion in Navy contracts described in FBI affidavits as possibly tainted by leaks of inside bidding information.
Carlucci acted a day after release of court papers detailing telephone conversations wiretapped by the FBI and alleging that a defense industry consultant had used his relationship with a Navy procurement officer to obtain confidential federal contract data.The consultant, Marcus Saunders, talked as if he were passing cash to Navy official George Stone, FBI agents said in the sworn statements.
Carlucci named nine projects, none of them major weapons systems, on which the Pentagon will immediately halt progress payments in the first major crackdown on contractors since the Pentagon procurement scandal broke last month.
He said the Pentagon was reviewing all contracts with companies named in the documents - including those with Litton Industries Inc., Hazeltine Corp., Emhart and Norden Systems Inc., Carlucci said.
He also said the Pentagon is moving to suspend Stone, a division chief for the Navy's Space and Warfare Command. It also is seeking to bar Saunders, Varian Associates Continental Electronics Manufacturing Co. and Varian employee Joseph Bradley from doing further business with the Pentagon until the allegations are cleared up, he said.
The value of the contracts on which payments were frozen exceeded $1.2 billion.
According to the FBI affidavits, Navy official Stone read a list of sealed bids from 10 companies competing for a $120 million aviation control contract to Saunders, an Alexandria, Va., consultant who preceded him in his job.
The affidavits said investigators believed Saunders is in possession of dozens of other confidential government documents or data relating to the nine contracts.
The affidavits, the first to be made public in the scandal, said Saunders generally shared the information with Thomas Muldoon, a Washington consultant who has worked for Norden Systems Inc., one of the bidders. It said Muldoon also was "considering working" for other competitors.
Saunders, who was fired from his Navy job in 1982 for insider stock trading, lives with Marilyn Burgess, the ex-wife of another Navy procurement official, the affidavits revealed.
One of the two affidavits unsealed by a federal magistrate said that in January, Saunders helped Stone move into his new home - and the next day forwarded more information to Muldoon about the contract.
The agent said she believed "that Saunders is paying Stone for this information he is now receiving," noting Saunders' taped remarks that he had been "paying a lot in expenses to get information on specific programs."
For his part, Saunders was paid half of Muldoon's $8,000 monthly consulting fees from Norden, the affidavit said.
The documents were filed in support of a court warrant prior to FBI searches last month at the offices of Saunders and Varian Continental, a Texas contractor. They apparently were unsealed because federal prosecutors forgot to extend a request to keep them secret pending further investigation.
They provided the first close-up glimpse of the nature of a stream of revelations expected in the weeks ahead. Federal law enforcement sources have said they expect similar affidavits, supporting dozens of FBI search warrants, to be released soon.
Carlucci said last week the Pentagon would take action against contractors when he had specific evidence of wrongdoing.
All of the contracts on which payments were frozen Friday involve communications and electronics command and control equipment. Carlucci was asked at a press conference why he had taken action in this case when none had been taken as a result of an earlier court document alleging bribery of unnamed Pentagon officials in connection with weapons made by the McDonnell Douglas Corp.
"This is very much more specific. We have specific evidence," he replied.
Pentagon officials later said two of the nine contracts had not yet been awarded - only competitive proposals had been requested from industry. The officials also said one of the nine contracts - $38 million for electronics display units - had been completed.
They could not explain how payments could be frozen on a contract that had been completed, or the two not yet started, except to say there still might be some development work on the completed contract.
This is a information box that accompanied the story above.
PAYMENTS BLOCKED ON 9 SYSTEMS -VLF - Very Low Frequency;low frequency communication systems and related improvements for ships, aircraft and shore facilities;$6.3 million.
-TESS - Tactical Environmental Support System; a computer-based oceanographic system for ships and shore sites; $58 million.
-ATACC - Advanced Tactical Air Command Central; a series of communications terminals and automated work stations; $118 million.
-UYQ - an aviation electronics display unit for carrier anti-submarine warfare; $38 million.
-DCT - Digital Communications Terminal; a hand-held programmable input-output unit used for composing, editing, transmitting, receiving and displaying messages in conjunction with standard military radios; $150 million.
-Bancroft - a tactical high frequency single channel radio for tanks; $30 million.
-FOCS - Fiber Optics Cables; for digital switches and radio equipment; $51 million.
-MRC-139 - a digital wide-band radio set providing secure line-of-sight voice and data links; $49 million.
-ASWOC - Anti-Submarine Warfare Operating Center; a system of 20 shore-based command and control centers that support and coordinate anti-submarine warfare efforts; $712 million.