Aspin Urges Moratorium on New Contracts for Suspect Contractors

House Armed Services Chairman Les Aspin (D-Wis.) Wednesday called on Defense Secretary Frank C. Carlucci to impose a moratorium of up to two months on all new contracts awarded to defense firms under suspicion in the current Pentagon procurement fraud scandal.

Aspin’s proposal, which he offered at the end of a six-hour hearing into the legal and procurement issues raised by the scandal, reflected the frustration expressed by many members of Congress that Carlucci has taken no dramatic action in the wake of disclosures that former defense officials have been illegally funneling classified documents to contractors.

“If I were advising Frank Carlucci, I would say to him: ‘You’ve got to do something that’s pretty dramatic, if only to prove that you’re on top of the situation,’ ” Aspin said. “And I think you ought make an announcement: ‘Hold it, if this is going on, and we’re going to stop it, then absolutely no contracts for 60 days.”

Draws Mixed Reviews

But his idea met with mixed reviews among Pentagon officials gathered at the witness table. Robert B. Costello, undersecretary of defense for acquisition, pledged to discuss the proposal with Carlucci on Thursday, but Navy Undersecretary H. Lawrence Garrett III expressed skepticism that such a proposal could be carried out.

Spokesmen for Northrop Corp., Litton Industries and Teledyne Inc., three Southern California defense contractors served with search warrants, refused to comment on Aspin’s recommendations. However, a spokesman for Cubic Corp., a San Diego contractor whose offices were searched two weeks ago, said the proposal suggested that the companies were “guilty until proven innocent.”

“That’s contrary to the law of the land,” he said. The procurement scandal has presented Pentagon officials with a difficult decision: whether to cancel tainted contracts that otherwise are deemed necessary for U.S. national security. In addition, litigation related to the scandal is expected to delay many important Pentagon procurement decisions related to these firms for months or years.

“We’re looking at a serious potential gridlock over national security issues regarding what you do with tainted contracts,” Aspin said.

The Wisconsin Democrat proposed the moratorium as a short-term step that would give the Pentagon time to determine whether any of the companies seeking new contract awards are likely to be indicted in the scandal. U.S. Atty. Henry A. Hudson has promised indictments before the end of the year.

“It seems to me we’re looking for some kind of a solution that falls between the two extremes: One is to say: ‘ C’est la vie , that’s life,’ and go ahead and produce the planes and whatever else,” Aspin said. “And the other extreme is to say: ‘By God, you’ve broken the law. We’re going to take your contract away and damn the taxpayer and the security of the country.’ ”

As a second step, Aspin proposed that all new contracts include a clause stating that the government has the right to reclaim all profits if it is proved the contract was obtained by illegal means. But the Defense Department’s general counsel, Kathleen A. Buck, said the Pentagon already has such a right under existing law.

Defense officials generally took the position that the procurement scandal is the result of wrongdoing by a small group of people and will not require dramatic changes in the laws or Pentagon practices governing defense acquisitions. When asked by Aspin to explain what is at the root of the scandal, Costello replied: “One word: greed.”

But committee liberals such as Rep. Patricia Schroeder (D-Colo.) clearly were exasperated with the Pentagon’s willingness to defend the status quo. At one point, when Costello sought to defend the department’s position, Schroeder blurted out: “You drive me crazy.”

Need for ‘Some Monitoring’

“As a taxpayer,” she added, “the thing that grinds me the most that’s coming out of the Defense Department is the idea that these are just individuals. I think there has to be some monitoring of these contracts that are under a cloud.”

Liberals seemed particularly upset by the Pentagon’s decision announced last week to permit McDonnell Douglas Corp. to sell F-18s to Kuwait, even though the company has been associated with the scandal. Aspin warned Pentagon officials that they would hear “screams” from Congress if additional new contracts are awarded to firms under suspicion.

Aspin and other members of Congress also criticized Pentagon officials for failing to develop a policy to guide them in dealing with the estimated 75 to 100 existing contracts worth “tens of billions of dollars” that are involved in the alleged scandal. He said the Pentagon must decide under what circumstances those contracts will be canceled.

One of the contracts under scrutiny is the Navy’s choice of a team composed of General Dynamics Corp. and McDonnell Douglas to build the super-secret advanced tactical fighter. A competing Northrop Corp.-Grumman Corp. team lost in its bid to build the plane.

Buck said each of the tainted contracts would be reviewed once the indictments are handed up and the Pentagon knows for certain which firms are involved. In addition, Garrett said, new Navy contracts involving companies under suspicion would be subject to an examination to make certain they were not obtained by improper means.

Navy Undersecretary Garrett also defended the Navy’s approval of the F-18s sale, noting it could easily be rescinded in the future if the people involved are indicted. “We can always void that contract,” he said. “I think it will be easier to make that decision in six months.”

In another development in the fraud case, FBI agents this week searched the offices of a business linked to a Maryland congressman and an individual tied to a late New York representative, actions that provided the clearest sign yet that members of Congress are under scrutiny in the Pentagon scandal.

Sources had said earlier that the congressmen, Rep. Roy Dyson (D-Md.), and the late Rep. Joseph P. Addabbo (D-N.Y.), were two of three legislators implicated in the scandal. None of the 42 searches previously conducted of homes and offices by federal agents had provided a direct link to any member of Congress.

A source familiar with the investigation said, however, that Monday’s FBI search of the Bryant Ticket Agency in Union City, N.J., focused specifically on the purchase last month of prized Broadway tickets to “Phantom of the Opera” for Dyson.

Dyson’s trip to New York was paid for by the Unisys Corp., a Unisys spokesman said. The spokesman said also that Unisys employees had purchased the theater tickets at Dyson’s request. The congressmen met that weekend with Unisys consultant Charles F. Gardner, one of a number of former Unisys officials who have been implicated in the scandal. Dyson aide Tom Pappas committed suicide the next day, jumping from the 24th-floor balcony of a Manhattan hotel.

Investigators also searched the office of Richard Seelmeyer, who was an aide to the late Rep. Addabbo. As chairman of the defense subcommittee of the House Appropriations Committee, Addabbo was described by several industry and government officials as a powerful advocate for Unisys’ corporate predecessor, the Sperry Corp.

Law enforcement sources said the searches had been among those originally planned by investigators and that no further searches are planned. No one would explain why the Congress-related searches were saved until last.

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