U.S. Closes General Dynamics Probe Without Filing Charges : Justice Dept. Finds No Criminal Intent in Trident Inquiry

The government is closing its investigation of General Dynamics Corp.’s submarine-building program without prosecuting anyone, the Justice Department announced today.

In a statement, the department said the books are being shut on the 3-year-old inquiry involving the nation’s largest defense contractor “because of the absence of any reasonable prospect of a successful prosecution.”

The decision brought immediate outcries from Capitol Hill, where Rep. John D. Dingell (D-Mich.) issued a statement declaring that he will conduct a hearing on the matter.

Subcommittee Chairman

“We will look at this case in the context of other, similar cases as we prepare for a related hearing in the next month or so,” said Dingell, chairman of the oversight and investigations subcommittee of the House Commerce Committee.

The department said the investigation began in 1984, when former General Dynamics executive P. Takis Veliotis turned over a set of tape-recordings of telephone conversations with David Lewis, chairman and chief executive officer of General Dynamics; Gordon MacDonald, vice president for finance, and others.

The tape-recorded conversations suggested that the company may have misstated in 1977 the delivery date of the first Trident submarine and may have misstated the magnitude of cost overruns the company expected to incur in a submarine construction program.

In addition, the department’s investigation focused on whether there were other occasions where false data was provided to the Navy, the Securities and Exchange Commission, Congress or others in government.

The statements at issue consisted in large measure of estimates of future performance and, in each case, the General Dynamics estimate “was not totally lacking in support,” Victoria Toensing, a deputy assistant attorney general in the department’s criminal division, said in the statement.

‘Badges of Fraud’

The government said it was unable to find proof of criminal intent and was unable to find “badges of fraud,” such as destruction of documents, creation of false documents, multiple sets of books or records, inconsistencies between records, or instructions to employees to lie or withhold information.

Veliotis has alleged that General Dynamics deliberately underbid a Navy contract to build 18 Los Angeles-class submarines in the 1970s. He said a 1978 settlement with the Navy on cost overruns, which supplied the company $639 million, was based on fraudulent claims.

In outlining its reasons for not prosecuting General Dynamics, however, the Justice Department said the Navy stated that it did not rely on delivery date or cost overrun data published by the company.

The Navy stated that it used the same underlying data to develop its own estimates.

Dingell’s statement addressed this aspect of the General Dynamics case, saying that “one issue” that will be addressed at the upcoming hearing “is the apparent acquiescence of the (military) services in overruns and other abuses by their contractors.”