Consultant Paid Wife of High Navy Official : Mrs. Paisley Received Up to $50,000 While Her Husband Was in Charge of Naval Procurement

The wife of former Assistant Navy Secretary Melvyn R. Paisley was paid by a defense consulting firm established by a key figure in the Pentagon contract fraud scandal while her husband was the powerful chief of Navy procurement in the Pentagon, The Times has learned.

Federal and state records show that Vicki A. Paisley received as much as $50,000 in 1986 from VAMO Inc., a Virginia consulting company formed early that year by William M. Galvin, a defense consultant whose offices were searched recently by FBI investigators.

At the time that Vicki Paisley was receiving what financial disclosure documents described as “compensation for services” from his company, Galvin was representing a number of defense contractors doing business with the Navy Department.

Mrs. Paisley worked also as an employee and consultant for BDM International Corp., a major Virginia-based defense contractor, beginning less than two years after her husband took the Pentagon post as top deputy to Navy Secretary John F. Lehman Jr.

Disqualifies Himself

In a memorandum dated Feb. 5, 1987, and turned over to reporters by the Navy this week, Melvyn Paisley said that he had disqualified himself from participation “in any matters involving BDM Company” at the time his wife joined BDM in April, 1983. However, the Navy did not provide the memorandum that Paisley said he had prepared in 1983.

After Paisley resigned from the Navy Department on March 31, 1987, he also represented BDM, along with McDonnell Douglas Corp. and other major defense contractors. According to published reports, the FBI has subpoenaed BDM records. Company officers did not return repeated calls.

Paisley is the highest-ranking former or current Pentagon official known to be a target of the investigation, which involves widespread fraud and bribery across all branches of the military. The case, which sources say is likely to result in more than 100 indictments, is expected to be the worst scandal of its kind in Defense Department history.

Mrs. Paisley was linked to the expanding investigation of fraud allegations by government sources in Thursday’s editions of The Times, which reported that she had assisted her husband in copying classified documents smuggled from the Pentagon. Paisley allegedly passed the sensitive information on to McDonnell Douglas for what one source described as “staggering fees.”

Neither Paisley nor his wife would speak to reporters who went to their office in the Watergate Tower here Thursday. Galvin did not respond to a similar request made at his office on another floor of the Watergate complex.

Mrs. Paisley’s link to VAMO was first disclosed in a federal financial disclosure report filed last year with the U.S. Office of Government Ethics by her husband. On the form, Paisley said that his wife was paid between $15,000 and $50,000 as “compensation for services.” The company was described only as a “sole ownership” marketing analysis firm as of May 1, 1987.

Firm Founded in 1986

According to Virginia corporation records, VAMO was established on Jan. 28, 1986, by William and Evelyn Galvin and Alice M. Backo. The charter authorized the company to issue $50,000 in stock and described the firm as an “operations analysis and management consultant organization.” Whether the stock actually was issued could not be determined.

However, corporate records filed in 1988 show that control of VAMO has been transferred to Mrs. Paisley, now listed as its president, and to one of her relatives, Janet T. McKim.

Mrs. Paisley refused to discuss VAMO when reached by a Times reporter who telephoned the company. “If you are from the press, call my husband’s attorney,” she said twice.

Other calls to VAMO were answered by a secretary who said: “Vicki Paisley’s office.” Requests for information about the company were rejected, and terms of any transaction between the Paisleys and Galvins could not be learned.

Offices Searched

FBI affidavits indicate that Melvyn Paisley’s relationship with Galvin is under scrutiny by federal investigators, who last week searched their Watergate offices, Paisley’s home and the files of Galvin’s stepson, Ken Brooke.

Also searched were other Galvin-connected companies: Athena Associates, one of his Washington consulting firms, and Armtec Inc., a small electronics manufacturing firm in Palatka, Fla., of which Galvin is a board member.

VAMO, which now lists its corporate address as the Paisleys’ private residence in McLean, Va., was opened originally in a small office in nearby Vienna, a Washington suburb that contains a concentration of defense industry consultants.

Galvin apparently set up a cluster of small firms with changing names and addresses to do consulting work. VAMO was one of several operating out of a 12-floor office building in Vienna.

Four days after incorporating VAMO in January, 1986, Galvin formed Sapphire Systems Inc. and opened its offices three floors up in the same building. Among his partners in that company is Charles F. Gardner, another defense consultant and former vice president of Unisys Corp., who also is under investigation by the FBI. Sapphire changed its name to Locus Ltd. last October and moved into Galvin’s Watergate office.

List of Clients

Galvin’s list of consulting clients reportedly includes such large defense contractors as United Technologies Corp. and its subsidiaries, Pratt & Whitney and Norden Systems; Unisys, Loral Corp. and Cubic Corp.

The FBI searched offices of all six firms last week, in addition to those of McDonnell Douglas in St. Louis. The search of Pratt & Whitney is said to have focused on relationships between Galvin and Paisley and Eugene Tallia, a vice president and head of the firm’s Washington office.

Staff writers Ronald J. Ostrow and Melissa Healy in Washington and Carla Lazzareschi in Los Angeles contributed to this story.