Pentagon May Ban 2 Officers of Gen. Dynamics

The Pentagon escalated its dispute with General Dynamics Corp. Thursday, announcing that Defense Secretary Caspar W. Weinberger will seriously consider a recommendation to bar the two top officers of the nation’s leading defense contractor from doing further defense work for the government.

If Weinberger debarred General Dynamics Board Chairman David S. Lewis and chief financial officer Gorden E. MacDonald, the firm would be cut off from future defense contracts unless the two men resigned. The Defense Department’s chief spokesman, Michael I. Burch, said that Inspector General Joseph H. Sherick would formally present the proposal to Weinberger within a few days.

Wrongdoing Denied

General Dynamics, headquartered in St. Louis, is the target of a number of congressional investigations involving allegations of stock manipulation, overbilling of the Pentagon--including kennel fees for one executive’s dog--and irregularities in the production of Navy submarines. Both Lewis and MacDonald have denied any wrongdoing, and Lewis has asserted before a House subcommittee that the firm is “an honest and reputable company.”

On Wednesday, Sherick had told the House Energy and Commerce subcommittee on oversight and investigations that he believed Lewis and MacDonald should be debarred, although he has no authority to do so himself.

Burch told reporters Thursday that Sherick was preparing a written recommendation to that effect, although the Pentagon spokesman refused to predict what action Weinberger might take. However, he said that the Defense Department favors debarment of key officers as “one option” available to penalize firms that overcharge the government on military contracts.

Al Spivak, General Dynamics’ spokesman in Washington, said Thursday: “As far as we’re concerned, there are no grounds whatever for debarment of either the company or its senior executives. We are hopeful that, when all the facts are considered, Secretary Weinberger will disagree with that (debarment) recommendation.”

Makes Key Weapons

General Dynamics is the sole manufacturer of several key weapons, including Trident ballistic-missile submarines, Tomahawk cruise missiles and F-16 jet fighters. When asked how the Pentagon could manage if work on those weapons stopped, Burch responded: “We will cross that bridge when we come to it.”

Forty-five of the nation’s top 100 defense contractors are under investigation by the Pentagon because of allegations of overcharges or contract abuses, according to Burch. Some of the cases, he said, involve only minor technical matters, but others deal with more serious charges that may result in referrals to the Justice Department for criminal prosecution. He refused to name the firms.

Earlier this month, the Defense Department said that an audit of General Dynamics’ records showed that the company had overcharged the government by $244 million through improper billing for administrative costs--primarily entertainment, travel and personal expenses--on military contracts dating to 1973.

Returned $244 Million

The audit findings were announced at the conclusion of a 30-day period in which Weinberger froze all overhead payments to General Dynamics to permit “a complete and comprehensive review of all billing procedures.” The company subsequently agreed to surrender the $244 million to the Pentagon.

In response to questions, Burch said that he knew of no previous case in which the top officers of a major defense firm had been debarred, although he said the Pentagon had taken action against middle-level officers of some defense contractors. The officers involved subsequently resigned, he said.

Cheaper Fighter Planes

In a related development Thursday, two Republican senators warned the Air Force that Congress may force it to buy some Northrop Corp. fighter planes that are similar to--but less expensive than--the F-16, produced by General Dynamics. The Air Force plans to buy 2,700 more F-16s. (Details in Business Section.)

Sen. Ted Stevens (R-Alaska), chairman of the Senate Appropriations defense appropriations subcommittee, told Air Force officials at a subcommittee hearing that “we like the idea of competing planes.” Similarly, Sen. Warren B. Rudman (R-N.H.), a member of the panel, said that, because of the alleged misconduct, “we ought not to reward General Dynamics.”