Dynamics Says It Didn’t Keep 2 Sets of Books

General Dynamics’ chief financial officer denied under oath Monday that the company used two sets of books to deceive the Navy on a costly submarine-building contract, but a key senator told him, “The denials just don’t wash.”

Gorden E. MacDonald, General Dynamics’ executive vice president of finance and administration, told a congressional committee that it is untrue that the company fed false progress reports to the Navy while keeping an accurate set of books for itself, all while running up $1 billion in cost overruns.

And he complained that the corporation’s accusers have put it through “a cruel and unjustified ordeal.”

MacDonald did acknowledge that there are memos in corporate files containing widely varying estimates on the number of man hours and the costs required to build 18 attack submarines for the Navy.

Calls Memos ‘Opinions’

But, in testimony before the congressional Joint Economic Committee, he dismissed these memos as the opinions of “different people working from different perspectives and operating on different assumptions.” He said none of them represented the official position of the corporation.

Sen. William Proxmire (D-Wis.) said there is substantial documentary evidence that General Dynamics kept two sets of records on its submarine contracts, one “grossly inaccurate” that was made available to the Navy, the other essentially correct that he said was kept from the Navy.

“It seems to me General Dynamics deceived the Navy and knew at the time that it was deceiving the Navy.” Proxmire said.

“You’ve denied everything,” he told MacDonald. “The denials just don’t wash.”

Proxmire produced a two-inch thick stack of internal General Dynamics records to bolster conclusions reached in a report by Richard Kaufman, a senior committee staff member, that the company deliberately kept the Navy in the dark about production delays and rising costs.

The Kaufman report also concluded that General Dynamics received a second contract to build additional submarines by concealing from the Navy evidence that substantial cost overruns had been incurred on the initial contract.

Denies Allegation

MacDonald, who was acting general manager of the Electric Boat division for parts of 1976 and 1977, denied this allegation also.

In one 1976 document, a company executive at Electric Boat., G. G. Johnson, strongly criticized procedures at the construction plant, saying, for example, that the company’s estimate at the time that it would require 31 million man hours to complete the contract was “unrealistic and unachievable.”