Defense Firm Pleads Guilty to Rebate Scam

Martin Marietta Corp. pleaded guilty Tuesday to two mail fraud charges and making a false statement in a scheme that defrauded the Pentagon out of at least $1.35 million in travel expense rebates.

The Bethesda, Md.-based defense contractor agreed in a plea bargain to reimburse the Defense Department $250,000 for investigative costs.

U.S. Atty. Breckinridge L. Willcox said in a prepared statement that the company also is negotiating a civil settlement for repayment of the rebates to the Defense Department.

No company officials were named in the court papers, but “additional indictments are a distinct possibility,” Willcox said.

In the plea bargain, the company admitted keeping the travel rebates between October, 1983, and October, 1984.

Rebates Exceeded $1.8 Million

Specifically, the company charged the government for travel expenses related to Martin Marietta defense contracts, and arranged, through a contract with IVI Travel Inc. of Chicago, to keep rebates on the fees that the company paid to airlines, rental car companies and hotels, Willcox said. Defense Department rules require that such monies be returned to the government, the statement said.

The amount of rebates credited to Martin Marietta exceeded $1.8 million, and about 75% of the travel was incurred on government-sponsored contracts, Willcox said.

U.S. District Judge Joseph H. Young did not set a sentencing date.

Assistant U.S. Atty. Elizabeth H. Trimble recommended criminal fines totaling $12,000 for the three counts. Martin Marietta said it had agreed to pay the fine.

A Martin Marietta spokesman said the company “sincerely regrets and is embarrassed by this incident, which involved a service element outside the mainstream of the corporation’s business.”

The activity that led to the court plea “was conducted by employees . . . without the knowledge of the corporation’s senior management.”