Paisley’s Bid Rule Changes Aided Unisys
Melvyn R. Paisley, while assistant U.S. Navy secretary, abruptly revised bidding rules on a multibillion-dollar contract in a way that favored Unisys Corp. at a time when Paisley’s wife was receiving up to $50,000 from a company formed by a principal Unisys lobbyist.
ITT Corp., whose Van Nuys-based Gilfillan division lost out on the bid, lodged a formal protest charging that those rule changes in 1986 effectively eliminated all of Unisys’ competition for a contract involving the Aegis radar defense system.
Possible Conflicts
The latest disclosure raises questions over possible conflicts of interest involving Paisley in what appears to be a key network linking him to other pivotal figures in the current Pentagon contract fraud case.
The relationship among Paisley, Unisys executive Charles F. Gardner and the company’s lobbyist, William M. Galvin, is a principal focus of the federal investigation into allegations of fraud, bribery and bid-rigging on defense contracts. Gardner had responsibility for the Aegis project.
Executives of ITT said its protest was prompted by widespread reports in the defense industry that Galvin, now a business associate of Gardner, had boasted that he could use his influence with Paisley to obtain the contract for Unisys.
The change benefiting Unisys was made during the period that Paisley’s wife, Vicki, received “compensation for services” worth between $15,000 and $50,000 from VAMO Inc., according to records filed with the U.S. Office of Government Ethics.
Virginia corporate records on VAMO show that Galvin not only acted as the incorporating agent when the company was formed in January, 1986, but he listed himself as the original president. Evelyn Galvin, his wife, was listed as the original corporate secretary. Mrs. Paisley and Janet T. McKim, one of her relatives, were listed as the corporate officers in January, 1987.
E. Lawrence Barcella, an attorney for the Paisleys, said the FBI has seized VAMO’s corporate records, but he said that “it is our understanding that Galvin didn’t pay Vicki Paisley for any work done by her under VAMO.” He did not dispute the fact that Mrs. Paisley was compensated, only that Galvin was the source of that compensation.
Barcella said that Galvin only handled certain corporate paper work for Mrs. Paisley. He said he could not explain the apparent conflict with information contained in the government ethics filings.
Listed as ‘Assets’
The ethics records did not specify the form of Mrs. Paisley’s reported compensation by listing it as cash, stock or other method of payment. It was entered on the financial disclosure form of her husband under a category labeled “assets.”
Barcella refused to say who provided this compensation.
At stake in the 1986 contract award was a major share of the $9 billion in future Aegis contracts to be shared with RCA Corp., the sole contractor on the system since 1969. The new “second-source” contractors were invited to join the project as part of a congressional effort to increase competition.
The Navy initially divided the second-source contract into six separate parts, attracting bidding from a wide range of defense contractors. But, in June, 1986, sources said, Paisley abruptly decided that the Navy should choose a single second-source company to build the Aegis radar and consolidated the project into a single winner-take-all package, leaving companies only eight weeks to revise their bids.
Competition Eliminated
The sudden shift effectively eliminated all bidders except for the Unisys Corp., formerly Sperry Corp., which was the only company to have submitted bids on all six components of the Aegis project. No other company remained in the bidding.
“That didn’t leave anybody but Sperry,” said Jim Gallagher, a New York-based spokesman for the ITT Corp., which later lodged formal protests with the Navy and the General Accounting Office over the bid-rule changes.
Paisley was the top Navy procurement official responsible for Aegis contract. Defense News, a trade journal, reported Monday that Paisley initiated the shift in the Aegis procurement strategy. The journal said its sources attributed “the dramatic shift” to Paisley’s close association with Galvin.
A former Pentagon official told The Times that Paisley’s “recommendation on how (to structure the contract) would have been the one given the nod.”
ITT executives said Monday that their protest of the bid-rule changes was prompted by similar reports within the defense industry that Galvin had boasted that he could use his influence with Paisley to deliver the entire Aegis contract to Unisys.
“That’s what it appears went on,” one ITT officer said, “which is, of course, what prompted the protest to the Navy.”
Another figure linked to the Pentagon fraud investigation, Rep. Bill Chappell Jr. (D-Fla.), had publicly pressured Paisley to award the entire Aegis contract to Unisys. UPI has reported that Chappell received at least $20,000 in the last four years from consultants linked to Unisys.
Pentagon and industry sources said the Aegis project was worth even more than its $9-billion price tag indicated.
“If you were the key player in (Aegis), you would be the leader in technology for surface ship electronics into the year 2000. Being a winner in this was a very key victory that had to be sought,” a source familiar with the contract said.
A spokesman for Unisys, William Beckham, said the company would have no comment on the case but would respond to questions about “factual matters.” He said Galvin’s duties as a consultant on the Aegis project included “monitoring relations” with Congress and other agencies.
At the same time, Gardner’s duties in the company’s Shipboard and Ground Systems Group in Great Neck, N. Y., would have involved some responsibility for Aegis, Beckham said. Gardner’s job title was vice president and general manager of the group’s surveillance and fire control division, he said.
The association between Gardner and Galvin went beyond their contractor-consultant relationship.
Virginia state records show that Gardner became a director of Galvin’s Sapphire Systems Inc. between January, 1986, and January, 1987, a period during which he was still a vice president at Unisys.
Two Unisys spokesmen indicated Monday that they were not aware of Gardner’s association with Sapphire. Industry ethics experts said that such a link to a company in a related field would likely be prohibited unless Gardner had obtained specific permission from his superiors. It could not be determined if Unisys had approved the business association.
Improper Channel
“It’s the sort of relationship that most companies would expect or require to be disclosed and be subject to top management’s approval before it could take place,” said Gary Edwards, executive director of the Ethics Resource Center, a Washington organization that advises companies on ethics guidelines. “It would pose the appearance of an improper channel of information into their company to outsiders.”
“No company I know of would tolerate that,” said another expert, a former counsel for a defense contracting firm.
Staff writers Melissa Healy, Ronald J. Ostrow, Jim Schachter and Robert W. Stewart contributed to this story.
