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GE Fined $1 Million, Faces Three-Year Pentagon Ban : Admits to Fraud on Missile Job

Associated Press

General Electric Co., the nation’s fourth-largest defense contractor, pleaded guilty today to defrauding the government of $800,000 on a Minuteman missile contract and was fined the maximum of $1,040,000.

The plea came on what was to have been the opening day of jury selection for trial on the charges.

U.S. Atty. Edward Dennis Jr. said GE’s guilty plea means that it could be barred for up to three years from bidding on any new defense contracts, but he added that he has received no indication of what the Pentagon will do.

U.S. District Judge Louis Charles Bechtle said the maximum penalty was “fully and clearly appropriate here” because the nation is dependent on GE’s defense work “just like a newborn baby is dependent on its mother.”

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GE pleaded guilty to 108 counts of making false statements and making and presenting false claims for payment to the Air Force to recover cost overruns on a contract worth $47 million to refurbish the Minuteman Mark-12A intercontinental ballistic missile.

Re-Entry Systems Involved

The work, according to a grand jury indictment returned against GE on March 26, involved research, development, engineering and other services for the Minuteman re-entry systems done at GE plants in Philadelphia and suburban King of Prussia between June 22, 1980, and April 19, 1983.

The indictment charged GE with altering employees’ time cards without their knowledge, instructing employees to falsely report what contracts they were working on, having workers submit blank time cards that were filled in by managers and allowing the firm’s accounting department to transfer costs from one contract to another to recover the cost overruns.

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GE, in a statement after the indictment, said incorrect charges on employee time cards involved only “100 time cards out of approximately 100,000 cards used at the facility.”

After the indictment was issued, Air Force Secretary Verne Orr suspended GE from bidding on any new defense contracts but later limited the suspension to the company’s Re-Entry Systems Division, which was involved in the alleged mischarges.

GE is the largest defense contractor ever suspended from doing business with the government and the largest charged in a criminal indictment with defrauding the military. The company did $4.5 billion worth of business with the Pentagon in fiscal 1983, the last year for which statistics were available.

Ex-Manager Admits Role

GE attorney Henry S. Ruth told Bechtle that GE, which had originally pleaded innocent, changed its position after a former unit manager, Roy Baessler of Topsfield, Mass., admitted that he had been involved in intentional mischarging and agreed to testify for the government.

Ruth said the Fairfield, Conn.-based GE, with 332,000 employees, “is criminally responsible for the acts of just a few of those. We accept that responsibility.”

Baessler and GE Chief Engineer Joseph Calabria, 50, of King of Prussia were charged in the March 26 indictment with making false declarations. Dennis said the government has filed a motion to dismiss the charges against Baessler. Calabria will be tried in June.


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