GE Indicted on Charges of Defrauding AF

General Electric Co., the nation’s fourth-largest defense contractor, was indicted by a federal grand jury Tuesday on charges that it defrauded the Air Force of $800,000 on a Minuteman nuclear missile warhead contract.

The indictment, the latest in a series of federal actions and inquiries against Pentagon suppliers, came as Atty. Gen. Edwin Meese III predicted that other major defense contractors will face similar charges in the weeks ahead.

“I suspect there will be many more cases against some of the most major contractors coming along within the very near future,” Meese told the Senate Judiciary Committee just hours before the Philadelphia grand jury’s indictment was returned.

The grand jury accused General Electric of having used deceptive accounting practices to get the Air Force to reimburse it for huge cost overruns incurred on a Minuteman missile warhead contract from 1980 to 1983.

Employee time cards and other records were altered by company officials to make it appear that the overruns had occurred on other government projects, for which federal reimbursements were available, the grand jury alleged.

Under the Minuteman contract, General Electric was required to absorb all costs above a set ceiling and thus should have had unreimbursable expenses of $800,000, according to Edward Dennis Jr., the U.S. attorney for Philadelphia.

False Statements Claimed

Specifically, the company was charged with four counts of presenting false claims to the government and 104 counts of making false statements to government agents in connection with the alleged scheme. Joseph Calabria, 50, a chief engineer, and Roy Baessler, a former group manager, were each charged with two counts of lying to the grand jury.

If convicted, the company faces maximum fines of $1,080,000 and possible debarment proceedings aimed at all or part of its Pentagon contracts, which totaled more than $4.5 billion last year. Calabria and Baessler could face 10 years’ imprisonment and fines of $20,000 upon conviction.

Company officials, while conceding Tuesday that bookkeeping errors may have occurred in connection with the multimillion-dollar Minuteman project, denied any deliberate wrongdoing. Calabria and Baessler had no immediate comment.

Meese Defends Inquiry

Meese, in his congressional testimony, vigorously defended the work of the Justice Department’s defense procurement fraud unit, which was set up to investigate growing allegations of contract abuse.

Sen. Charles E. Grassley (R-Iowa) had contended that the unit so far had failed to pursue large, complex defense fraud cases--indicating that there are two systems of justice, one for the poor and another for the rich.

Meese rejected the characterization, arguing that the unit became fully operational only in 1983 and that it takes time to develop complex cases. His face reddening, Meese told Grassley: “I think your conclusions are just flat wrong.”

Meese did not identify other corporations against which fraud charges might be brought, nor did he give other specifics.

Charges Explained

U.S. Atty. Dennis, explaining the GE charges in a statement released by the Justice Department in Washington, said GE had a series of contracts in Pennsylvania to replace and modernize the re-entry vehicles on Minuteman intercontinental nuclear missiles. The re-entry vehicle carries the missile’s warheads as well as arming and fusing devices to activate and target the warheads.

Dennis emphasized that the indictment, which resulted from a four-year investigation, “does not allege, and there is no evidence to suggest, that there are any defects in the actual work performed by GE on the contracts.”

John Terino, a spokesman at the company’s space systems division at Valley Forge, Pa., said there was no criminal wrongdoing by General Electric or any of its employees. Terino said that only 100 time cards out of 100,000 were found to be in error and “GE has indicated its willingness to reimburse the government for any improper charges that might have been made.”

“There is no allegation of charges for products or services not received,” he added. “We are confident we can work out all the issues arising out of this matter and continue our role as a responsible supplier of the nation’s defense needs.”