High-Level Executive Out in TRW Probe : Pentagon to Follow Up With Its Own Investigation of Overcharging
TRW’s investigation into overcharging on certain defense contracts has led to the departure from the company of a senior corporate officer, group Vice President Robert L. North, it was learned Tuesday.
Meanwhile, the Pentagon will conduct its own investigation into the overcharging case and will review the legitimacy of the TRW internal probe that led the company to return $2.5 million to the Defense Department, defense officials said Tuesday.
TRW disclosed Monday that it had discovered “instances of improper charging on certain government contracts” and had taken disciplinary action against 12 employees, including terminating two managers whose names were not released.
Hugo Poza, head of TRW’s military electronics and avionics division in San Diego, where the mischarging took place, said he and North were the two executives who TRW said had been terminated.
North, contacted Tuesday at his home in San Diego County, acknowledged that he had left the firm Monday.
“I was the division manager which included the organization where the problem was discovered,” North said. “In my opinion, the company is blaming employees for what was a deficiency in procedures and training prior to 1986.”
North, whose office was at the Redondo Beach headquarters of TRW’s electronics and defense sector, was vice president in charge of the firm’s Electronic Systems Group, which includes the San Diego division. An electrical engineer, he was among the top two dozen officials of Cleveland-based TRW and was employed by the company for more than 20 years.
Military officials said Tuesday that North was in charge of the San Diego division during the years of the overcharging, principally 1983 and 1984.
An employee of the San Diego division interviewed Tuesday questioned whether TRW was attempting to isolate the Redondo Beach unit of TRW from the allegations, even though North was based in Redondo Beach.
“Everybody here (in San Diego) is very, very unhappy,” the employee said. “What they are trying to do is localize it here and save their golden nugget in Redondo Beach.”
The investigation into the overcharge is believed to date to September, 1984, when an anonymous letter sent to Air Force officials alleged that improper charges were being made by TRW’s Military Electronics division, as it was then known.
The allegations suggested that the company was charging the Pentagon for direct contract work through various indirect general accounts, such as independent research and development accounts, bid and proposal accounts and general and administrative overhead accounts.
Such a scheme could shift the burden of cost overruns on fixed-price contracts to the government when the company should have absorbed the overrun.
Indirect Benefits
TRW said that its own investigation had determined that the mischarging occurred, in part, on overhead accounts, an umbrella that takes in many indirect charges that a contractor can make in defense work.
There has been no suggestion that the 12 disciplined employees benefited directly from the mischarging, but a company official noted that they stood to gain indirectly from bonuses tied to the performance of the division.
Senior TRW officials met with Defense Department Inspector General Derek J. Vander Shaaf and his staff last Friday to brief them on the results of the internal investigation, a military aide in Vander Shaaf’s office said Tuesday.
Audit a Possibility
“The inspector general has to verify it. They don’t have any choice,” an Air Force official said. “They have to determine whether the $2.5 million (that TRW paid back) is an appropriate amount.”
It has not yet been determined which federal investigative agency will conduct the investigation or what form it will take, the aide to Vander Shaaf said.
“It could be an audit,” he said. “If it turns criminal, it could go to the DCIS (Defense Criminal Investigative Service).”
A TRW statement said the company will cooperate fully with any federal investigation.
