Pentagon Probe Halts General Dynamics Pay
Defense Secretary Caspar W. Weinberger, announcing a tough new policy on overcharging by defense contractors, Tuesday suspended about $35 million in Pentagon payments to General Dynamics Corp. until a review of charges that the company has consistently billed the government for improper expenses.
According to Pentagon spokesman Michael I. Burch, General Dynamics allegedly billed the government for such unauthorized expenses as corporate trips and entertainment, advertising--and, in one case, boarding an executive’s dog in a kennel.
Weinberger, in a speech to an American Legion convention, said that he ordered the 30-day halt in payment of general and administrative expenses because General Dynamics was “billing us, as part of their overhead costs, (for) a lot of expenses that did not benefit the government and had nothing to do with the contract involved.”
May Be Extended
He said the suspension would be extended if the Pentagon did not complete its inquiry within a month.
When a House subcommittee last week conducted hearings on alleged overcharging by a number of defense contractors, “we found that General Dynamics’ testimony was nauseating,” Burch declared.
The disclosures in congressional testimony “may even involve some criminal matters,” Weinberger told the legionnaires, and cases of possible fraud are being investigated by the Justice Department.
If the Pentagon investigation shows any improper billings, General Dynamics will return the money immediately, company spokesman Peter K. Connolly said in a statement. “The company believes it will be able to satisfy the Defense Department’s concerns regarding the validity of its billing procedures,” Connolly said.
General Dynamics, with headquarters in St. Louis, is the nation’s largest defense contractor and was awarded $6.8 billion in government contracts in fiscal 1983. It is a major manufacturer of F-16 jet fighters, Trident submarines, Tomahawk cruise missiles, Army tanks and other weapons.
The 30-day suspension affects about 8% of the company’s total monthly billings to the government, according to Connolly’s statement, an amount estimated at $35 million. The bulk of government payments to General Dynamics, not affected by Weinberger’s suspension order, covers services and deliveries of hardware for various weapons.
In the future, Weinberger said, all defense contractors must “certify, under penalty of perjury,” that their charges do not include political, entertainment or other expenses not directly beneficial to the government.
Such certification “will do a lot toward eliminating these improper charges,” Weinberger said. “ . . . After our auditors get through, we simply will refuse to pay anything of that kind.”
Billed for Dog’s Care
In testimony last week before the House Energy and Commerce subcommittee on oversight and investigations, it was disclosed that a General Dynamics executive boarded a dog at government expense while he attended a weekend conference at a South Carolina resort.
Other testimony indicated that a variety of other unauthorized personal expenses--including entertainment and travel costs--often wound up being billed to the government.
General Dynamics Chairman David S. Lewis, appearing last Thursday before the subcommittee, defended his company as “honest and reputable” and denied allegations of fraud in its billing practices.
Many of the charges stemmed from earlier testimony by P. Takis Veliotis, a former executive with General Dynamics’ Electric Boat Division who is now a fugitive from federal kickback charges.
‘Occasional Slip-ups’
Although Lewis conceded that “occasional slip-ups” in corporate accounting for personal travel and entertainment occur, he denied that such expenses were routinely added to government billings and strongly denounced Veliotis’ charges as “malicious and untrue.”
Nonetheless, according to Burch, “some of the claims made were preposterous and completely out of line and did in no way benefit national security. And most of it was not necessary to build . . . a nuclear submarine.” Of Weinberger’s announcement, he told reporters: “If you want to call it a get-tough policy, you can.”
Largely because of Veliotis’ allegations, General Dynamics already is being investigated by three House panels, a Senate committee and the Navy on charges of stock manipulation, inadequate financial disclosures and billing the Pentagon for improper overhead costs.
In addition, other major defense contractors have been criticized recently after they were found to be charging the government hundreds of dollars each for such relatively inexpensive items as screwdrivers and plastic toilet seat covers.
Crackdown ‘Overdue’
Rep. John D. Dingell (D-Mich.), chairman of the oversight and investigations subcommittee, called Tuesday’s crackdown “overdue” and added: “We expect a significant amount of money to be returned to the Treasury.”
Although General Dynamics executives refused to comment publicly beyond the brief statement issued by the company’s headquarters, one executive who requested anonymity pointed out that entertainment or travel bills sometimes can be legitimate expenses.
“We have four company conferences a year, three in St. Louis and one elsewhere,” he said. “That involves hotel bills, meals and other expenses. I would never have thought of trying to put dog-boarding bills on the expense account, but I have put in for baby-sitting costs when I had to attend an evening function.”
