Firm, Six Men Charged in Defense Procurement Case

A federal grand jury filed the first charges in the 2-year-old Pentagon procurement investigation Friday, accusing a California-based defense contractor, a Navy employee and five other men with crimes including conspiracy, bribery and theft of government property.

In a related case, Michael Savaides, 41, an employee of Teledyne Electronics, pleaded guilty to conspiracy to commit bribery. He could be sentenced to a maximum of five years in prison and a $250,000 fine.

The 86-page indictment, which outlines 27 counts, focuses on activities alleged to have been undertaken by Teledyne Electronics, a branch of Teledyne Industries of Newbury Park, Calif., and three men: Navy procurement specialist Stuart E. Berlin and private consultants Fred H. Lackner and William L. Parkin, a former Navy acquisitions official.

If convicted, Teledyne faces a fine of up to $6.5 million.

The indictment charges that Teledyne and three of its officers agreed to pay Parkin $160,000 to assist them in obtaining a Navy contract related to radar worth $100 million.

To obtain the contract, the indictment contends, Parkin paid Lackner, a private consultant in California, who “in turn paid Stuart E. Berlin . . . for his assistance in manipulating the procurement process to insure that the . . . contract was awarded to Teledyne,” said U.S. Atty. Henry Hudson, who is leading the nationwide investigation.

Berlin participated in various decisions within the Navy affecting the contract and is accused of giving Teledyne advance information so the company could tailor its bids, Hudson said.

The Justice Department said in an affidavit released last week that Berlin received about $1,000 every few months from Parkin and Lackner in exchange for documents.

If convicted of all charges, Berlin, Parkin and Lackner could face maximum penalties of 185 years in prison and fines of $5.5 million each, Hudson said at a news conference.

Savaides also had a financial relationship with Parkin, the government said. The affidavit also said Savaides discussed sharing money with Lackner.

Also named in the indictment were Teledyne employees George H. Kaub, Eugene R. Sullivan and Dale Schnittjer. They could face confinement ranging between 50 and 85 years and fines of up to $2.5 million if convicted on all counts.

Conspiracy Charge

The overall conspiracy charge alleges that the defendants worked together to defraud the Navy and the Air Force, to bribe a public official, to make false statements and to commit wire fraud.

In advance of the indictment, Teledyne’s attorney, Thomas Patten, said the company had been offered a deal by the government but was not satisfied with the terms. Attorneys for Parkin and Lackner have contended that their clients did nothing wrong and will be vindicated in court.

Federal agents used telephone wiretaps in the case, which was first made public last June when agents searched offices and homes of people suspected to be involved.

Friday’s indictment came a few hours after Savaides, Hazeltine Corp. of Greenlawn, N.Y., and two former Hazeltine employees pleaded guilty to related charges stemming from the investigation. Prosecutors said those who pleaded guilty to reduced charges are cooperating with the government.

Hazeltine, a division of Emerson Electric Co., agreed to plead guilty to conspiracy to defraud the United States, conversion of government property and making false statements to the government, company attorney Scott Muller said.

Competing for Contract

Affidavits released last week suggested that Hazeltine hired Parkin to obtain inside information from Pentagon employees that would allow the company to compete for a $15.9-million contract for battlefield equipment.

Under terms of the agreement, Hazeltine, which is cooperating with the government, agreed to pay fines of nearly $2 million, including court costs.

Two former Hazeltine employees, Joseph Colarusso, 58, who was the company’s senior vice president, and Charles Furciniti, 54, who was a marketing representative, pleaded guilty to one count of conspiracy to defraud the government and commit wire fraud.

Like Teledyne’s Savaides, the maximum sentence they could face is five years in jail and a $250,000 fine.

The guilty pleas were entered before Judge Claude M. Hilton in U.S. District Court. Hilton set sentencing for March 17.

‘Very Significant’

Assistant Atty. Gen. Edward S. G. Dennis, head of the Justice Department’s criminal division, called the first indictments in the complex case “very significant,” but he and others said they were only the beginning of the prosecution phase of Operation Ill Wind.

“In the next few months, you’ll see a great deal of additional activity,” Hudson said concerning the investigation of the Defense Department’s $150-billion-a-year defense contracting system.

In addition to prosecuting people accused of illegal acts, Hudson said, a goal of the investigation was to have a “deterring effect” on corruption inside the Pentagon. At the heart of the case are allegations that private consultants bribed government employees for information that gave companies an edge in winning contracts.

At the Pentagon, defense officials said the Navy is “reviewing all information released in connection with the indictments announced . . . by the Justice Department to determine any necessary action regarding Navy programs, personnel, contractors or consultants.”