FBI Probes Hughes for Alleged Bribe : Payment Reportedly Made as Part of Bid for a Saudi Contract

The Federal Bureau of Investigation is looking into allegations that Hughes Aircraft Co. paid a bribe to the firm of Saudi Arabian arms merchant Adnan Khashoggi during a competition for a $1.8-billion Saudi air-defense contract.

The investigation is the second FBI inquiry into illegal acts by Hughes to come to light in recent months.

Last November, the FBI confirmed that it was conducting a preliminary investigation into charges that Hughes purchasing agents had accepted bribes to award subcontracts to small firms.

Lost Competition

The latest investigation apparently is based on information from former Hughes engineer Lee Wilson, who alleged that a $1-million bank draft was handed over in Riyadh, Saudi Arabia, in October, 1981. The aim allegedly was to buy influence with the Saudi government.

Hughes lost the competition to build the air-defense system on Feb. 25 when Boeing Co. of Seattle was selected for the contract, which includes supplying radar and command, control and communication equipment.

A federal grand jury in Los Angeles has issued between six and 13 subpoenas to top officials at Hughes Ground Systems Group in Fullerton, the unit that was involved with bidding for the Saudi Peace Shield program, according to sources.

An official statement from Hughes said the allegations were made by a “disgruntled” former employee. The El Segundo-based company said it fully investigated the allegations internally.

“Hughes found no evidence that any of its employees were involved in any illegal or improper conduct,” the Hughes statement said. “We intend to cooperate fully with the government in its inquiry and are confident that it, too, will find the allegations are untrue.”

Wilson was fired two years ago, allegedly for stealing a computer. Wilson contends that he was authorized to take the computer home to use in his work and that Hughes used the charge to justify firing him.

Charges Dropped

On Wednesday, Wilson pleaded no contest in North Orange County Municipal Court to trespassing charges, according to his attorney, John Dolan. At the same time, charges that he stole a computer from Hughes were dropped. Sentencing is set for July 3.

A top Hughes official dismissed Wilson’s allegations as “horse manure,” because Saudi Arabian officials were not even involved in selecting the winner of the Peace Shield program.

“This was a foreign military sale that went right through the U.S. Air Force,” the Hughes official said. “The Electronic Systems Division at Hanscom Air Force Base made the decision on who to award the contract to.”

He added: “What did we pay $1 million for? To lose?”

But the Hughes official, who is not himself under subpoena and who agreed to talk only if he was not identified, said that about half a dozen of his employees have been subpoenaed by the grand jury.

FBI spokesman John Hoos said he could neither confirm nor deny the existence of the investigation. The U.S. attorney’s office also made the same statement.

Enforcement Loose

Bribery of foreign officials would violate the Foreign Corrupt Practices Act, which was enacted after numerous instances surfaced during the 1970s in which U.S. corporations were paying bribes to win foreign business. Enforcement of the act, however, has been less than strict in recent years.

Nevertheless, Wilson is scheduled to testify before the grand jury April 9, Dolan said. It was not known who else has appeared before the grand jury.

The other FBI investigation into allegations that Hughes’ purchasing agents accepted bribes is continuing, said Hoos, the FBI spokesman in Los Angeles.

The investigation is believed to focus on several dozen current and former Hughes employees at the firm’s Electro Optical Data Systems Group in El Segundo.