U.S. Suspends Paradyne From Federal Bids : Ban Follows Indictment Over Computer Contract

Paradyne Corp. has been suspended from receiving further U.S. government contracts because of federal fraud allegations involving a $115-million computer system for the Social Security Administration, a company official said Monday.

“We received a letter late last week from the Health and Human Services Department suspending us from further federal contracts as a result of the indictment,” said James L. Slattery, vice president and general counsel. The letter was dated Dec. 16.

Slattery said that, overall, Paradyne expects an estimated 5% of its revenue to be affected.

The corporation reported $290 million in gross revenue last year.

Currently, about 10% of Paradyne’s business involves federal contracts, he said, but half of that is an existing agreement with Social Security that the company believes will remain intact.

“To the best of our belief, it applies to new business, not to existing contracts, unless the agency decides to terminate,” Slattery said.

Limited Effect

“There will be an effect on the company’s business, although it’s limited to a 5% figure. There is always a possibility that, on an exception basis, the company will be able to bid and supply products to the U.S. government,” Slattery said.

On Dec. 12, a federal grand jury in Tampa, Fla., returned a 14-count fraud indictment against the firm, along with present and former top officials and one Social Security employee.

The indictment alleged conspiracy, bribery, perjury and obstruction of justice to win a contract to computerize Social Security field offices. It was the largest contract ever awarded by the Social Security Administration.

Federal prosecutors accused Paradyne of faking a computer demonstration during the bidding process by showing equipment that either wasn’t owned or wasn’t fully developed.

Paradyne’s contract with Social Security to service equipment was renewed in 1984, and prosecutors said that work has been satisfactory.

Paradyne called the charges “ludicrous.”