100 Indictments Expected in Defense Fraud Inquiry

The FBI’s investigation of alleged widespread fraud and bribery in the nation’s defense contracting system is expected to result in the indictments of more than 100 government workers, contractor employees and former Pentagon officials who are now private consultants, sources familiar with the inquiry said Wednesday.

The cases, which began with Navy contracting but now involve all military services, constitute the largest defense contracting investigation in recent years and are still expanding, the sources said.

“Think big, not small,” said one official knowledgeable about the cases, which are expected to result in charges in about two months.

At the heart of the investigation are former Defense Department employees who left government service to become highly paid consultants to defense contractors, one knowledgeable source said.

Some of them are suspected of obtaining vital contracting data by paying sizable bribes to Pentagon officials, and others allegedly traded in information that they took with them from government service.

A government source confirmed that the investigation involved the use of court-authorized wiretaps on Pentagon phones and elsewhere. One source confirmed that the investigation extends to Capitol Hill but said that no “hard information” has been developed there. That end of the inquiry could prove fruitless, the source said.

Other cases already are “made,” one official said, but the FBI is hoping to obtain information from some individuals involved in those inquiries that will lead to broader charges.

“President Reagan has urged the Justice Department to make a thorough and exhaustive investigation of the allegations,” White House spokesman Marlin Fitzwater said.

Fitzwater said that Reagan first got word of the investigation in a briefing by Defense Secretary Frank C. Carlucci Tuesday afternoon.

The FBI disclosed the investigation Tuesday as agents conducted searches at the Pentagon and 35 other sites in 12 states, including some in California. Two additional search warrants were served Wednesday on individuals in Connecticut and Alexandria, Va.

Detailed in Affidavits

Details of the investigation are spelled out in affidavits by FBI agents that were given to justify issuance of the search warrants, but those documents will remain sealed unless they are challenged by those whose premises or offices were searched, an FBI spokesman said.

However, one of the sealed search warrants described by a government official authorized agents to search the work space of Stuart Berlin, a low-level procurement specialist in the ship systems engineering branch of the Naval Air Systems Command in Crystal City, Va. The search warrant specified four individuals and one company that are suspected of having made payments to the Naval Air Systems Command official.

The warrant, signed Monday by U.S. Magistrate W. Curtis Sewell, authorized investigators to search and seize any of Berlin’s memos, correspondence, payment records, phone indexes, bank statements, withdrawal and deposit slips and checks dating from 1986 to the present.

Navigation Systems

The search warrant sought information involving development and acquisition of two highly specialized navigation systems used in military aircraft and a shipboard electronic system.

Sen. John W. Warner (R-Va.), the ranking minority member of the Armed Services Committee, said Wednesday that the procurement fraud probe has found evidence of “rampant bribery in the government.”

“I’m getting the facts that there are 15 companies involved,” Warner said in comments inadvertently recorded as he spoke to Sen. Sam Nunn (D-Ga.) prior to a congressional hearing. The comments were aired Wednesday night by WUSA-TV.

The Virginia senator said there were “many cases where they paid $500 or $1,000 to a government employee for proprietary information and then went out and sold it for $50,000.”

Warner wrote a letter to Carlucci urging him to review the Pentagon procurement process as a result of the allegations.

“I ask that you specifically focus on questions involving the safeguards in handling of competitive and technical data within the defense procurement process,” Warner wrote.