Carlucci Halts $1 Billion in Tainted Navy Contracts : Bribe Probe Spurs Action by Carlucci

Defense Secretary Frank C. Carlucci announced today that the Pentagon has suspended all payments on nine Navy contracts worth $1 billion that may have been tainted by bribes and fraud.

The suspensions will not damage national security, he said.

He said the Pentagon is immediately stopping payments to four major defense firms, Hazeltine Inc., Emhart Corp., Norden Systems Inc. and Litton Industries of Beverly Hills.

Carlucci said he took the action as a result of documents in the case unsealed by a judge in U.S. District Court in Dallas. (Story on Page 8.)

The affidavits disclosed that a defense consultant passed along inside information on nine Navy contracts worth more than $522 million in a conversation that was monitored by the FBI.

Additionally, Carlucci said, the department is beginning suspension procedures against three individuals and a company named in the documents, reviewing existing contracts with the four implicated companies and freezing new contracts on eight weapons systems.

‘Suspension Procedures’

“The affidavit provides the department with evidence concerning individuals and companies,” he said.

“The Navy has initiated suspension procedures with respect to George Stone, Mark Saunders, Joe Bradley” and the Continental Electronics Division of Palo Alto-based Varian Associates Inc., he said.

Carlucci said the companies and officials involved are being notified of the Pentagon action.

And he said the department will take further action as evidence in the case becomes public.

‘Wherever we have specific evidence, we will take action. As I have indicated previously, we do not need to wait (for) convictions, or even trials, for that matter,” he said.

“We are in an ongoing dialogue with the Department of Justice,” which is conducting the investigation, he said.

‘All We Can Do Is Wait’

“The Department of Justice quite correctly points out that what they are dealing with is grand jury information, and (it) would be inappropriate for them to supply this information to us at this time. But as soon as they are able to, they will be supplying information to us, and as soon as we get the information, we will act.”

Until Pentagon officials see what is in other affidavits in the case, he said, “until we have all the information from the Department of Justice, we can’t make . . . judgments. All we can do is wait for the wheels of justice to take their course.”

Carlucci said that the current actions do not gravely impair national security but that additional suspensions might.

“If you say ‘impact on national security,’ clearly anything that slows down the process of producing defense equipment or requires us to reopen contracts has an impact on our ability to get equipment in the field,” he said.

“If you are talking about grave or serious impact on readiness or modernization programs, I would not yet put what we have done today in that category. But clearly it has an impact,” he said.