Payment Halted on Navy Contracts : 9 Projects Worth a Total of $1 Billion May Be Tainted in Procurement Probe

Defense Secretary Frank C. Carlucci on Friday suspended all payments on $1-billion worth of Navy contracts alleged to be tainted as a result of the military procurement investigation.

Carlucci acted on the basis of information included in search-warrant affidavits that were unsealed by a federal magistrate in Dallas on Thursday. In the documents, the FBI said it eavesdropped as a Navy procurement official passed along inside information on nine contracts worth more than $522 million.

Carlucci also announced that the Pentagon was beginning suspension procedures against three individuals and a company named in the documents.

He said the Defense Department was reviewing existing contracts with four implicated companies and freezing new contracts on nine weapons systems.

‘Provides With Evidence’

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

“The Navy has initiated suspension procedures with respect to George Stone, Mark Saunders, Joe Bradley and the Continental Electronics division of Varian Associates Inc.”

The Justice Department, caught off guard by the disclosures in Dallas, took steps to ensure that no additional affidavits or search warrants were inadvertently disclosed in the probe.

At a hastily called news conference, Carlucci said the Pentagon would take further actions as evidence in the case becomes public.

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

“We are in an ongoing dialogue with the Department of Justice,” he said. “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,” Carlucci said.

Contracts Reviewed

He said that the current actions did not gravely impair national security, but that additional suspensions might. “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.

Carlucci said the Pentagon was reviewing existing contracts with four companies named in the Dallas affidavits--Litton Industries Inc., Norden, Hazeltine and Emhart. Of the four, only Litton has been named by the Pentagon as among the top 100 companies with which it does buiness.

The largest single weapons system on which payments are being frozen is called the Anti-Submarine Operating Center, a $712-million system of shore-based command and control centers to coordinate efforts to locate, and in time of war destroy, submarines.

The Dallas affidavits disclosed that FBI agents eavesdropped as Stone, a Navy procurement official, read to Saunders, a consultant, the secret bids from 10 companies competing for a $120-million Advanced Tactical Air Command and Control system.

Saunders is a former Navy procurement officer convicted of and fired for stock trading on insider Navy information in 1982. The FBI said Saunders was receiving inside contract data from Stone, his Navy successor, and it “believes that Saunders is paying Stone for this information.”

Officials Transferred

Stone is one of six Pentagon officials transferred to other duties after their offices were searched.

The FBI said that on Sept. 30, 1987, its agents intercepted a conversation at Saunders’ home between Stone and Saunders. It said:

“Stone provided Saunders with the following figures from each of the competitors’ proposals: SAIC--53.4; E-Systems--88.8; GE--90.8; Ford--132.1; Comptek--137.1; LTV--138.9; Grumman--140.3; Unisys--143.0; UTC (Norden)--144.4; and Litton--198.7. It is believed that these numbers refer to millions of dollars.

“It is not known exactly what the figures represented, but it is known that the figures were not supposed to be given out and that the lower its figure, the better off a company was in the competition,” the FBI said.

Firm Withdraws

Meanwhile Friday, Norden Systems Inc., one of those that had bid on the air control and command system contract, announced that it has withdrawn from competition. The Norwalk, Conn-based company, a subsidiary of United Technologies Corp., had been considered a top contender for the project

Norden, which manufactures radar systems and other military electronic materials, said it pulled out of the competition the week before last. That was 10 days after investigators disclosed that the company was among those implicated in the illegal sharing of classified or proprietary information among Pentagon employees, private consultants and defense industry contractors.

“We believe, at this point in time, that it is of paramount importance for the public as well as the government to have full confidence in the integrity of the . . . procurement process,” Louis A. Antonucci, Norden’s manager of contracts, said in a letter announcing the withdrawal.

On June 14, federal investigators searched Norden’s offices in East Norwalk, Bridgeport and Trumbull, Conn. A day later, the Shelton, Conn., home of James E. Rapinac, a Norden senior vice president for business development, also was searched.

Portable Shelter

The contract calls for the construction of a high-tech portable shelter used near a battlefield to control aircraft in all kinds of weather.

The other seven weapons systems on which new contract actions were suspended are:

- The Digital Communications Terminal, a $150-million program to develop a hand-held computerized unit to compose messages to be transmitted in short bursts by military field radios to minimize the possibility of interception or decoding by enemy forces.

- The Tactical Environmental Support System, a $58-million Navy program.

- A $51-million fiber optical project.

- The Digital Wideband Radio set, being developed at a cost of $49 million.

- A $38-million anti-submarine warfare electronics display unit.

- The $30-million Bancroft radio for tanks and Marine Corps light armored vehicles.

- A $6.3-million project to develop very low frequency and low frequency communications gear.