1863 Law Called Deterrent to Military Contract Fraud

A Civil War-era law allowing “whistle-blowers” to claim rewards for disclosing defense contractor corruption could be a major deterrent to military procurement fraud, Republican and Democratic senators said Tuesday as they criticized what they called Justice Department “happy talk” about crackdowns on contractor abuse.

Sens. Charles E. Grassley (R-Iowa), Howard M. Metzenbaum (D-Ohio) and Dennis DeConcini (D-Ariz.) joined in describing as too weak a package of anti-fraud legislation announced Monday by Atty. Gen. Edwin Meese III.

They made their comments as a Senate Judiciary subcommittee heard testimony on proposals to strengthen prosecution and penalties for defense contractors who cheat the Pentagon. Grassley, who heads the subcommittee, is pushing for amendments to update the 1863 law under which citizens can bring suit against errant contractors and receive part of the money recovered.

Allows Triple Damages

“Contractor fraud may well be the world’s second-oldest profession,” Grassley said, citing scandals 122 years ago leading to enactment of the law. His amendments would increase fines from $2,000 to $10,000 per claim, allow triple instead of double damages to be assessed against contractors and set a maximum civil penalty of $1 million.

Jay B. Stephens, associate deputy attorney general, told the subcommittee that the Justice Department has “an unrelenting commitment” to pursuing contractor fraud.

“We’re quite proud of our record,” he said.

Grassley, however, criticized the department for engaging in “happy talk” in describing its efforts to curb procurement abuses.

‘Rosy Picture’

“Every Justice Department witness up here paints a rosy picture, even though the evidence contradicts what they have to say,” he said. “ . . . The only ones who think the Justice Department is doing a good job are the people in the Justice Department.”

DeConcini also told Stephens: “I think your record is not so hot.” And Metzenbaum said: “The American people have lost confidence in their government’s ability to prosecute people.”

Grassley’s amendments are “the kind of prod the Administration needs,” Metzenbaum added.

Two witnesses at the hearing testified that they lost their jobs after refusing to join what they called schemes to alter time cards to falsely charge labor costs to “cost-plus” government contracts.

Amputee Fired

Robert Wityczak, a triple amputee from the Vietnam War, said he was harassed and eventually fired at Rockwell International Corp. in Downey, Calif., after reporting the time card irregularities and other contract abuses. The law should be strengthened, he said, “to encourage employees like myself who have first-hand knowledge of fraudulent misconduct to step forward.”

John M. Gravitt of Cincinnati, who has filed suit under the 1863 law against General Electric, said he was laid off as a foreman at a GE aircraft engine plant after refusing instructions to falsify labor vouchers. He said the case has cost him tens of thousands of dollars and is “an extremely risky proposition for me.”

His attorney, James B. Helmer Jr., said the law should be amended to allow whistle-blowers who are fired to regain their jobs. This, he said, would encourage contractor employees such as Gravitt to “act as watchdogs over taxpayers’ funds.”