CCT’s Zeta Labs Overcharged U.S., Investigators Find

Computer & Communications Technology Corp.’s Zeta Laboratories subsidiary probably overcharged the federal government $2.7 million on various military contracts in recent years, according to the results of a company investigation that were turned over to federal investigators Wednesday.

The Department of Defense’s inspector general office on Thursday confirmed that CCT had concluded an investigation by the company’s outside directors and the Arthur Young & Co. accounting firm. However, a department spokesman declined to comment on whether the department would initiate its own investigation or audit.

And, the $2.7 million figure does not include “possible fines or penalties,” according to CCT Chairman E.T. Bahre, who said he could not predict “in what amount, if any, such fines or penalties might be imposed.”

CCT was forced to rescind last summer’s $39-million sale of Zeta to Whittaker Corp. after the Los Angeles-based company uncovered suspected billing irregularities at Zeta. CCT returned Whittaker’s $33.6-million purchase price and also paid the Los Angeles manufacturer $5.4 million for publicly held Zeta stock that Whittaker had acquired.

CCT’s investigation focused only on Santa Clara-based Zeta Laboratories, which “was not a prime contractor in any of the instances,” according to Bahre, who said he had “no knowledge” of whether irregularities extended to other companies working on related contracts.

Zeta derived about 80% of its $23 million in 1985 sales from defense contracts. CCT posted sales of $67.7 million and a $9.9 million loss in 1985.

CCT will take at least a $2.7-million charge during the fourth quarter ended Dec. 31, according to Bahre, who suggested that despite rescinding the Zeta sale and taking the charge, CCT remains “very well able to meet the $2.7-million payment and carry out our business in the high-growth mode we’re (anticipating) during 1987.”