GE Says It Faces Fraud Indictment on Defense Contract : Four-Year Investigation Involved Time Cards for Work Done on Nuclear Warhead System

General Electric Co. said Monday that it may be indicted by a federal grand jury in Philadelphia on criminal charges of defrauding the government in mischarging on defense contracts to produce a nuclear warhead system.

GE, the nation’s fourth largest defense contractor, acknowledged that it has been under investigation for four years after news of the probe was disclosed by the Philadelphia Inquirer. The allegations against GE are the latest in a growing series of investigations and lawsuits brought against some of the nation’s largest defense contractors on charges ranging from fraud to shoddy workmanship.

The alleged mischarging by GE occurred in the production of Mark-12A nuclear warheads for the Minuteman missile at GE’s Re-Entry Systems Operation Division in Philadelphia.

The Associated Press reported Monday night that the U.S. attorney’s office in Philadelphia, which conducted the grand jury investigation, refused to comment on the case but scheduled a news conference for today to announce what it described as a major indictment.

100 Time Cards

GE spokesman Larry Vaber said the alleged incorrect charges occurred on 100 out of 100,000 time cards submitted by employees at the division between March and November, 1980.

“It is entirely possible, during the course of the multimillion-dollar contract, errors in charging did occur,” Vaber said. But he added that “there was no criminal wrongdoing on the part of the corporation or its employees.”

“We have in the course of the investigation said that we would be willing to reimburse the government for any incorrect charges that may have occurred,” he said.

Vaber said the time cards in question may have billed certain work to the wrong phase of the program. Typically, large defense contracts cover several different phases of a program, such as design development and production.

Vaber said he did not know how much money was involved in the alleged incorrect charges, but a source who asked not to be identified said that “it was not a large, multimillion-dollar amount of money.”

Contract Suspensions

However, an indictment against the company could possibly lead to a suspension of new military contracts for some of GE’s divisions. GE and its subsidiaries received more than $4.5 billion in military contracts in fiscal 1983, according to the most recent statistics available from the Pentagon on Monday.

A Pentagon spokesman, Lt. Col. Don Brownlee, declined to comment when asked about the Inquirer story Monday night.

A Defense Department investigator in Washington, requesting anonymity, told the Inquirer that an indictment would make GE by far the largest defense contractor in the country to face criminal charges of defrauding the government.

Two Persons Targeted

John Terino, GE’s product-information manager, told the Inquirer that, in addition to the company, the investigation targeted at least two persons who worked in the division. He indicated that the workers were middle-level employees.

Sources told the Inquirer that the grand jury was weighing perjury charges against one employee.

GE does not release figures for its profits on military contracts. The company reported net earnings of $2.28 billion in 1984.

Defense Department officials said political and national-security considerations would almost certainly enter into any discussion of suspending GE from military contracts, the Inquirer said.