Defense Firm Admits Guilt in Fraud Case
Martin Marietta Corp., one of the nation’s largest defense contractors, pleaded guilty today to mail fraud and making a false statement in connection with travel rebates it should have turned over to the federal government.
The guilty pleas on two counts of mail fraud and one count of making a false statement were entered in U.S. District Court in Baltimore.
The maximum penalty is $1,000 for each mail fraud count and $10,000 on the false statement count. In addition, the company agreed to pay the government $250,000 as reimbursement for the costs of the criminal investigation.
The amount of rebates credited to Martin Marietta exceeded $1.8 million and about 75% of the travel was incurred on government-sponsored contracts, U.S. Atty. Breckinridge Willcox said.
Martin Marietta performed $2.9 billion in business for the Defense Department in 1986.
Deal With Travel Agency
The U.S. attorney’s office said that the Bethesda, Md.,-based company entered into a mail fraud scheme arising out of an arrangement Martin Marietta made with a travel agency.
According to documents unsealed in court, the arrangement would allow Martin Marietta to retain rebates from government-sponsored travel, rather than credit such commissions back to the government as required by the Defense Department.
The travel agency involved in the arrangement was IVI Travel Inc. of Chicago.
A Martin Marietta subsidiary had been set up to perform services for the travel agency.
Intended to Be Earned
Willcox said Martin Marietta’s position was that the rebates were initially intended to be earned by the newly established subsidiary.
But the court documents said Martin Marietta admitted that for a year ending in October, 1984, the defense contractor received the rebates without regard to services performed by the Martin Marietta subsidiary.
The documents noted the existence of an internal memorandum delivered to a Martin Marietta vice president describing the travel agency arrangement as “very imaginative in getting around the rebate restrictions.”
The company replied in a statement that it was “embarrassed” and said the “activity leading to the plea was conducted by employees of the travel subsidiary without knowledge of the corporation’s senior management.”
The court documents stated that employees of Martin Marietta’s travel subsidiary carried out the scheme to defraud the U.S. government by creating false documents showing that the rebate money had been earned.
The false statement count covers Martin Marietta’s claim to the Defense Department for overhead expenses for 1983, which failed to credit the government for money received through the scheme.
