Justice Official Defends General Dynamics Effort : Army Delay on Files Cited in Demise of Fraud Case

Federal prosecutors abandoned their fraud case against General Dynamics’ Pomona division last month largely because the Army belatedly located 114 boxes of records that supported the defense contractor’s claims that it had acted in good faith, a top Justice Department official told Congress on Thursday.

Assistant Atty. Gen. William F. Weld, chief of the department’s criminal division, said prosecutors earlier had made a written request for all Army files dealing with the company’s contract to build the Sgt. York anti-aircraft gun system, formally known as the Division Air Defense Gun.

Months after General Dynamics and four of its executives were indicted on criminal charges in December, 1985, the Army located thousands of additional documents after the corporation filed a lawsuit under the Freedom of Information Act, Weld said.

Weld gave his explanation of the long-missing files as he defended the Justice Department against charges by Rep. John D. Dingell (D-Mich.) that the aborted investigation had been marked by incompetence and a waste of valuable resources.

Documents Called Significant

Testifying before the Energy and Commerce Committee’s oversight and investigations subcommittee, which Dingell heads, Weld said the documents were “most significant” in leading prosecutors to decide that, contrary to their original beliefs, there was insufficient evidence to prosecute General Dynamics for allegedly mischarging millions of dollars in development costs for the Sgt. York system.

The indicted executives included former National Aeronautics and Space Administrator James M. Beggs, who previously headed the Pomona division. Beggs has demanded a public apology from the department but has not received it.

Weld’s explanation for dropping the case paralleled one given last month by other Justice Department officials: that the $39-million development contract was “highly unusual” because it allowed General Dynamics simply to use its “best efforts” to stay within that ceiling and allowed more flexibility in charging overhead costs than prosecutors had originally believed.

But Weld’s testimony marked the first disclosure of the long-misplaced records, which he said Army clerks had “segregated from the main body of documents because of a lack of storage space.”

Defense Secretary Caspar W. Weinberger eventually scrapped the Sgt. York project because costs rose far above expectations and the weapon performed poorly in tests.

Dingell told Weld on Thursday that “we have real questions about the ability of the Department of Justice to manage a major fraud case against the unlimited resources of a major defense contractor,” which Dingell said in this case spent $21 million to defend itself and its executives.

Dingell added that “the commonality of interests” between contractors and government contract officers can lead to situations in which defense firms are, in effect, given immunity from financially fraudulent actions by military officials willing to get a product at any cost.

“Isn’t this a conspiracy?” he asked Weld.

Weld replied that military officials sometimes “overlook or ignore infractions by the defense contractor not because of an evil intent but because of a belief in the importance that the project or the new technology has to national security.”

“In many investigations,” he said, “we have found, rather than venal or improper acquiescence on the part of government officials, a merging and mutual reinforcement of interests.”

Weld said that these interests include “profit motive on the part of defense contractors and a desire to accomplish the mission on the part of the military.”