House Probing Alleged Kickbacks at Garrett

Amid growing national concern over kickback and bribery schemes in the defense industry, congressional investigators have begun probing recent firings of purchasing agents at Garrett AiResearch Manufacturing Co. of Torrance.

Garrett fired 13 purchasing agents and managers late last year in connection with an internal investigation of kickbacks and bribes that allegedly were accepted in exchange for the awarding of small defense subcontracts, Garrett officials have acknowledged. As many as seven other purchasing department employees, including managers, are said to have left voluntarily.

Some of those purchasing agents have already landed new purchasing jobs at other defense firms in the Los Angeles area, raising serious questions about whether a revolving door in the industry perpetuates the problem, according to investigators for the House Energy and Commerce Committee’s oversight and investigations subcommittee.

Disclosed by Vendor

“We have a concern that the trash is just passed around the industry,” a subcommittee investigator said Wednesday. “We are not the least bit satisfied with the way the industry is handling the problem once it comes to their attention.”

Details of the corruption at Garrett were disclosed to top management by a vendor who contacted the company, according to John Meyer, manager of corporate public relations. Meyer said the company immediately notified the Department of Justice when the allegations came to Garrett’s attention.

Meanwhile, the Federal Bureau of Investigation, which began an investigation before the firings, has not yet charged any Garrett employees, House investigators said in interviews, despite evidence that the payoffs had been going on for years.

For example, there is evidence that at least one purchasing department employee was supplied by Garrett vendors with a $3,000 stereo system and large quantities of liquor for parties, according to a Garrett source and vendors who spoke with a reporter.

Garrett officials reportedly formed a long list of vendors who were suspected of paying the bribes. The list became known around the industry as the “Fabulous 41.” In addition, polygraph tests were reportedly administered to a number of employees.

Hearings Scheduled

“Morale is in shambles,” one Garrett employee said this week. Garrett, a subsidiary of Allied-Signal Inc., makes a variety of aerospace products, including cabin pressurization systems for military and civilian aircraft.

The Garrett disclosures have come just as the Senate Governmental Affairs Committee’s oversight subcommittee is scheduled to open hearings today in Washington on kickback and bribery schemes in the defense industry.

The House subcommittee will hold similar hearings in several weeks.

Several defense subcontractors are expected to testify today in the Senate hearing that purchasing agents and administrators employed by major aerospace contractors sometimes expect cash bribes and expensive gratuities in exchange for the awarding of subcontracts to small firms.

According to Senate subcommittee sources, U.S. Atty. Richard Bonner of Los Angeles is expected to submit written testimony today stating that the practice is widespread and, by his estimate, may affect 50% of the purchasing agents in Southern California’s aerospace industry.

Earlier this week, two individuals were charged in U.S. District Court in Los Angeles with fraud involving subcontracts on the Stealth bomber.

In one case, an employee of Lamsco West Inc. of Glendale was charged with attempting to rig a bid.

In the other case, a Northrop employee is charged with helping award $600,000 worth of subcontracting work to a firm he secretly owned.

If convictions are obtained, these will be the first known cases of corruption affecting a secret program, the area of defense procurement that is the least scrutinized and audited, according to Pete Stockton, investigator for the House subcommittee.

Rep. John D. Dingell (D-Mich.), the subcommittee chairman, has written a letter to Defense Secretary Caspar W. Weinberger expressing concern over the relative ease with which so-called black (secret) programs may be vulnerable to fraud.

Two Garrett employees were fired last Oct. 2, and 11 others were terminated Nov. 15 “for conflict of interest following an FBI investigation into alleged kickbacks taken on subcontracts,” Meyer said.

Garrett has since replaced at least one of the managers with a person fired last year from a similar position at another defense contractor, reportedly because of his “management style and standards.”

“There is a real problem out there with a revolving door in the defense industry that allows purchasing agents to go from one company to another with immunity,” Stockton said. “We have found a lot of sources of information about this, and we are looking for more.”