Meese Seeks Tools to Fight Defense Fraud : Wants Civil Case Subpoenas, Access to Secret Grand Jury Data

Atty. Gen. Edwin Meese III, acting as the Pentagon announced that it had recovered $244 million in overcharges from General Dynamics Corp., said Tuesday that he would seek tougher investigative tools to strengthen the government’s hand against defense procurement fraud.

Those new tools could include the civil equivalent of a criminal subpoena and a way to use secret grand jury information, said Meese, who intends to make the pursuit of white-collar crime a leading priority.

Broadening Fraud Law

The Justice Department will also back legislation to be introduced today that would make it easier to crack down on fraud below $100,000--cases seldom pursued in the past--and will support broadening the False Claims Act, a Civil War statute that is a basic fraud law, he said.

Meese announced the harder-line approach in remarks to the department’s Economic Crimes Council in Boston, and department officials in Washington provided details.

Although all of the $244 million in questionable costs has been recovered from General Dynamics, Defense Department spokesman Michael I. Burch said, the Pentagon’s inspector general still is considering what disciplinary action to take against the giant defense contractor.

Inspector General Joseph Sherick said last week that he would recommend that General Dynamics in effect be “debarred” from doing business with the government unless Chairman David S. Lewis and chief financial officer Gorden MacDonald resign.

Choice for Firm

Sherick’s formal report is expected to be submitted by the end of this week to Navy Secretary John F. Lehman Jr., who will decide whether to order suspension or debarment. Such a move would appear to give the corporation the choice of losing the services of the two key executives or giving up future defense contracts.

General Dynamics said last week that there are no grounds for debarment and outlined steps it has taken to guard against letting overhead costs exceed allowable limits. But Burch countered that the reforms do not “make these executives innocent.”

One of the tougher tools the Justice Department will seek in its efforts to combat defense procurement fraud is legislation that would give it access to grand jury information in civil cases. A 1983 Supreme Court ruling held that such access would violate the federal rules of criminal procedure, which provide for the secrecy of grand jury material.

The ruling “created a Chinese wall between civil and criminal” investigations, a department official said--and, as a result, when federal criminal lawyers decide against seeking a grand jury indictment after investigating suspected fraud, the civil lawyers now “have to start from scratch.”

Numerous fraud cases that do not justify prosecution under the criminal law standard of “proof beyond a reasonable doubt” nevertheless could be pursued under civil suits seeking to recover money damages, according to the official. In a civil case, the standard of proof is a “preponderance of evidence” that a false claim had been made.

Under the proposed legislation, the government could apply for a court order to give lawyers in a civil case access to information developed by a grand jury. But it would have to show “a particularized and compelling need” for the material--the difficult standard required of private citizens.

Nevertheless, the proposal is likely to draw fire from civil liberties groups, which have challenged the fairness of grand jury proceedings and would oppose any expansion of their use.

The civil equivalent of a criminal subpoena, known as a civil investigative demand, has been in the arsenal of government antitrust lawyers since 1976. Such a demand may be obtained before a suit is filed and thus is used to determine whether there is sufficient evidence to bring suit.