Justice Dept. Was ‘Asleep at the Switch’--Grassley : Shut Off Testimony on Fraud

The Reagan Justice Department was “asleep at the switch” three years ago when a Pentagon investigator discovered that defense contractors and private consultants were illegally obtaining Pentagon weapons secrets, Sen. Charles E. Grassley said today.

Grassley (R-Iowa) said in a floor speech that a top Justice Department official duped him by grabbing the microphone from the investigator in October, 1985, as the investigator was about to testify about his findings.

Grassley, who chaired the House Judiciary subcommittee holding a hearing at the time, said: “I stopped the hearing at that point. I wish now I hadn’t. There wasn’t anything in that testimony that could have jeopardized that case.

“The public must be made aware of the fact that the Justice Department was asleep at the switch,” Grassley said, because it was investigating a single company and ignoring reports of widespread abuse in procurement, including bribery.

Coast-to-Coast Raids

The October, 1985, testimony alleged that private consultants were regularly receiving classified details about U.S. weapons systems.

A 2-year-old inquiry by the FBI and Naval Investigative Service into military procurement practices became public last week when agents conducted coast-to-coast raids on the offices of past and present Pentagon officials, private consultants and contractors.

In October, 1985, Grassley was chairman of the Senate Judiciary administrative practices subcommittee, a panel which he used to examine defense procurement practices. Grassley is a frequent critic of what he calls widespread waste and abuse in Pentagon spending.

Grassley said Justice Department officials blocked the testimony of Robert Segal, a Defense Department investigator who was the Pentagon’s liaison with the Justice Department’s Defense Procurement Fraud Unit. The DPFU was a special Justice Department office set up to investigate waste in the military budget.

Held in Low Esteem

It was well-known in the Justice Department that some elements of the Pentagon and the Justice Department held DPFU in low esteem and there is speculation that when the current allegations first came to light the matter was steered away from the agency and into U.S. Atty. Henry Hudson’s office.

Segal, who worked for the Pentagon’s Defense Criminal Investigative Service, was prepared to testify that private consultants regularly received classified Pentagon documents that should not have been available outside the government, Grassley said.

Grassley said the allegations predated the current investigation. “This goes back much before what we’re seeing now,” he said.

Segal’s testimony, which he never got to deliver but which was released publicly at the time, said that a defense procurement criminal case against GTE Corp. “is but the tip of the proverbial iceberg. . . . The investigation involves at least 25 companies. . . . Many of those companies are household words. . . . The primary focus of the case is . . . the indiscriminate distribution of both proprietary and highly classified government documents by individuals within and without the government.”

Justice Department official Victoria Toensing interrupted the key part of Segal’s testimony before he could give it and demanded that it be halted, saying he was touching on areas that concerned criminal matters pending against GTE.

The Justice Department then issued a statement saying that “the release by Sen. Grassley’s staff of erroneous, misleading and inflammatory information about a criminal case that is currently pending trial is most unfortunate and regrettable. . . . Justice must not be allowed to become a political football.”