Cubic Corp. Target of Federal Probe Involving Army Contract
Federal authorities are investigating Cubic Corp. for allegedly falsifying test results on a $10-million Army contract in 1982, company and law enforcement sources said Wednesday.
The FBI in San Diego, the Army’s criminal investigation division in San Francisco and Colorado, and the Defense Department’s Defense Criminal Investigative Service in San Diego are each looking into whether the San Diego-based defense contractor falsified test results of land-mine detectors that Cubic had contracted to refurbish for the U.S. Army.
The investigations began more than two years ago after the Army charged Cubic with non-performance and terminated a 1981 contract to refurbish 9,500 old detectors and build 2,110 new devices.
The Army, in an action now pending before the Armed Services Board of Contract Appeals, demanded a $4.4-million payment from Cubic, which filed a counterclaim for $3.6 million. The contract appeals board has yet to make a decision on the claims.
After the contract was terminated in 1984, federal authorities began investigating a handful of “major issues” at Cubic after they received a tip from a disgruntled company employee, sources said.
Investigators since have dropped all but one of the allegations because they “couldn’t prove it happened the way it was presented to us,” according to one source familiar with the various investigations.
The Army’s Criminal Investigation Division is investigating “allegations of falsifying test results” by Cubic personnel who managed the land-mine detection refurbishing contract, according to Gayle Peterson, a spokeswoman for the Army Troop Support Command’s research and development center in Belvoir, Va. “But at this stage, we can’t say for sure when that investigation will be wrapped up.”
In San Diego, FBI spokesman Gary Laturno said his agency would neither confirm nor deny that it is conducting an investigation.
In addition, neither Assistant U.S. Atty. William Braniff, chief of the federal fraud unit in San Diego, nor DCIS officials would discuss the case. DCIS is the investigative arm of the Defense Department’s Inspector General’s office.
Cubic said Wednesday that it is “cooperating fully” with the federal investigations but would not comment on the details or status of the federal probe.
The allegations against Cubic come as as the company is struggling to return to profitability after reporting the second unprofitable quarter in its 37-year history--a $3-million net loss during the third quarter ended June 30. For the nine months, Cubic reported a $1.4-million loss.
Lost B-1B Contract
Cubic’s third-quarter loss this year was sparked by problems in its simulation systems product line, which forced the company to establish a $4-million reserve to offset “technical problems” that had caused delays in product deliveries.
Cubic also was hurt late last year when Rockwell International canceled an $18-million contract with it to develop B-1B bomber training programs.
Despite skepticism from defense industry analysts, Cubic Chairman and Chief Executive Walter Zable has predicted that the company will recover in fiscal 1987.
Cubic still manufactures and sells hand-held land-mine detectors to military customers overseas. When Cubic was working on the Army refurbishing contract, fewer than 40 Cubic employees were involved in the land-mine detector program.
The Army ordered the refurbishing because the microprocessor-driven devices were unable to accurately detect non-metallic mines that were buried in arid soil. Cubic, which subsequently charged that the Army had supplied it with “defective” units, had delivered 185 of the refurbished units when the contract was terminated in 1984.
