Ex-Pentagon Aide Reportedly Used Smuggled Secrets

Defense consultant Melvyn R. Paisley, a central figure in the growing investigation of fraud and bribery in the nation’s weapons procurement system, allegedly arranged an elaborate scheme under which high-level Pentagon officials smuggled classified documents out of the Pentagon and allowed him to copy them with the aid of his wife, government sources said Wednesday.

Paisley allegedly passed the sensitive information along to his major client, McDonnell Douglas Corp., which paid him what one source described as “staggering fees” after retaining him as a consultant on the day he left his post as assistant secretary of the Navy on March 31, 1987.

James E. Gaines, Paisley’s close deputy in the Navy Department and one of six Pentagon officials stripped of their access to secret documents Tuesday, is suspected of being a major supplier of this classified and proprietary material, according to a document in the investigation.

Ex-Admiral Hired

Paisley, while pushing the sale of McDonnell Douglas’ F-18 fighter-bomber to South Korea, recommended that the giant defense firm hire Adm. James A. (Ace) Lyons, retired commander of the U.S. Pacific Command, to assist in the effort after he left the Navy, sources said. Lyons went to work for the giant aircraft maker last December, according to a search warrant served on McDonnell Douglas in St. Louis last week.

The warrant said investigators were seeking a wide range of documents “relating to the work of Ace Lyons for McDonnell Douglas from December, 1987, through 1988.”

The disclosures about Paisley’s purported operation are the most detailed to date of the inner workings of a scheme in which, allegedly, bribes and gratuities were paid for crucial Pentagon contracting information and highly proprietary information was passed to competitors on defense work.

E. Lawrence Barcella, attorney for Paisley and his wife, Vicki, said Wednesday that it would be “premature to make any comment. There is nothing specific from the prosecutors to comment on.”

He noted that no charges or indictments have been issued, only search warrants and subpoenas. “This case is still in the evidence-gathering stage,” Barcella said.

Paisley’s involvement in the sale of McDonnell Douglas’ F-18s to various U.S. allies, including South Korea, was a major focus of a warrant the FBI obtained last week to search the office of Thomas Gunn, the firm’s marketing vice president, at the company’s St. Louis headquarters.

Confidential Data Cited

The search warrant said that Paisley “has provided McDonnell Douglas and Thomas Gunn substantial information obtained from government officials which has been classified and/or confidential or not available to the contracting public.”

Bob O’Brien, a spokesman in McDonnell Douglas’ Washington office, repeated a statement that the company issued last week when Gunn’s office was searched.

“We are not aware of any improper requests by the company to Mr. Paisley or any improper activities by Mr. Paisley on behalf of the company,” the statement concluded. O’Brien refused to comment on the specific charges raised Wednesday.

Gaines, who investigators believe was a major supplier of contracting information to Paisley, was regarded as a key aide to Paisley when both were at the Pentagon, where Gaines served as deputy assistant secretary for acquisition until reassigned Tuesday by Defense Secretary Frank C. Carlucci.

Before coming to the Pentagon in 1985, Gaines worked at Boeing Co. in Seattle, where Paisley had served as a senior executive. The two men worked together in international marketing for Boeing’s aerospace unit in the 1970s.

Navy officials have said that Gaines will not speak to reporters. When reached Wednesday, a secretary in Gaines’ Pentagon office said only: “He can’t come to the phone right now.”

Lyons could not be reached for comment either.

As commander of the U.S. Pacific Command, Lyons exercised overall operational control over U.S. troops in South Korea. In that position, he would have been well situated to press the case for the F-18 to the South Koreans.

The Koreans, who have indicated that they were interested in buying as many as 120 new warplanes from the United States, have not yet chosen between the F-16, built by General Dynamics, and the McDonnell Douglas F-18. The Koreans have said that they will make the decision, worth billions to the winner, this year.

Pushed Out of Post

Lyons, a retired four-star admiral, was pushed out of his post as head of the Pacific Command shortly after James E. Webb took over as Navy secretary, succeeding John F. Lehman Jr. in May, 1987. Webb forced Lyons to retire to restore morale among senior naval officers, who were furious over the preferential treatment Lyons received from Lehman, a longtime Lyons friend and sponsor, sources said.

Lehman and Lyons became friends a decade ago when Lehman was an outside consultant dealing with the Navy and Lyons was one of his principal contacts in the service. When Lehman became Navy secretary in 1981, Lyons was quickly promoted to three and then four stars and given the enormous Pacific Command.

Lehman is of interest to federal investigators because a wiretapped conversation of a third party indicated that he may have warned Paisley that his phone was being tapped, according to sources familiar with the investigation. But the sources emphasized that Lehman is not a suspect in the Pentagon corruption investigation.

Staff writer Melissa Healy contributed to this story.