Cubic of San Diego Searched in Probe of Defense Firms

Seven government investigators led by the FBI seized “a small number” of records during a six-hour search of two offices in Cubic Corp.’s Defense Systems subsidiary building on Balboa Avenue, Cubic Vice President William C. Stewart Jr. said Wednesday.

The office searches, conducted Tuesday and authorized by a warrant signed by a judge in Washington, were part of a wide-ranging, two-year government investigation into large defense contractors and Defense Department officials in about 30 offices around the country. Searchers also seized records in two Pentagon offices.

The searches are part of an investigation into “possible widespread fraudulent activity within the Department of Defense’s contracting process,” an FBI spokesman said.

“I can’t tell you a whole lot” about what the agents were searching for, Stewart observed Wednesday.

Cubic was one of about 20 companies named in the warrants, according to Stewart. The investigation also focused on several Washington-area consultants, one of whom has in the past worked for Cubic on Defense Department contracts, Stewart said..

Cubic is “not aware of any improper actions by our people or consultants,” Stewart said. “This investigation evidently involves allegations that certain people or consultants in the Washington area allegedly passed to their clients information that the government believes or alleges was improperly obtained or transmitted,” Stewart added.

Government agents on Tuesday searched two Cubic offices in San Diego, and also met with Cubic Defense Systems Chief Executive C.C. Wellborn. The wide-ranging investigation also touched “at least one consultant we’ve used for several years,” Stewart said.

Agents on Wednesday searched the Washington-based offices of William Galvin, a consultant who has worked for Cubic on various defense contracts. Stewart was unable on Wednesday to provide the name of Galvin’s consulting firm and was unable to identify specific contracts that he had been hired to work on.

Investigators served Stewart with the search warrant at about 10 a.m. on Tuesday. The investigators, including FBI and other government agents, seized what Stewart described as “a small number” of documents.

Stewart said agents gave only a “general description” of documents that were taken during the search, adding that the company has yet to catalog the contents of those documents.

Cubic’s defense division has 1,400 employees. It manufactures flight simulators that use computer-generated images to train military pilots for combat missions.

Stewart said the federal agents told him “very little” about the investigation. Consequently, most of his information about the wide-ranging investigation has come from “what we’ve seen in the press.”

“This has been pretty much like a whirlwind, and we’re still trying to find out what’s going on,” Stewart said.

Cubic probably will not contest the validity of the search warrants. “We’re not going to fight with them,” company spokesman Jerry Ringer said Wednesday.

Cubic Corp. is a San Diego-based mini-conglomerate that reported $7.9 million in net income and $357 million in revenue for the fiscal year ended Sept. 30, 1987.

On March 25, 1988, Cubic paid $7.5 million to the federal government to settle a lawsuit that alleged irregularities in a mine-detector production contract. No criminal charges were filed in that investigation.

There were no apparent connections between that lawsuit and the search that agents conducted on Tuesday, according to Stewart.

As part of that March settlement, Cubic agreed to revamp an internal office that monitors government-contract compliance. To that end, Cubic has hired John Einhorn, a San Diego attorney, to act as an “independent outside ombudsman who will be available for employees to consult regarding ethical questions,” according to a March 25 letter sent to Cubic employees by Cubic President Walter J. Zable.

“We’re in the process of setting the ombudsman office up,” Stewart said. Cubic has “for some time” operated an ombudsman program that was directed by a company employee, Stewart said. However, Cubic agreed to a U.S. Army’s demand that the ombudsman not be a company employee.