2 Senators Score Defense Probe by Justice Dept.

The Justice Department’s battle against defense industry fraud has been plagued in recent years by “lackadaisical, careless, hands-off management” at the top, two U.S. senators said Saturday.

Sens. Charles E. Grassley (R-Iowa) and William Proxmire (D-Wis.) made public a recently completed study of the Justice Department’s effort and said it shows that the department is “losing the war against defense fraud.”

Although the study was requested more than a year ago and is unrelated to the FBI’s current investigation into widespread defense contract fraud, the senators said in a statement that they believe recent revelations in that Pentagon investigation represent only “the tip of the iceberg.”

Congress Decisions Cited

They said more wrongdoing might be discovered and prosecuted if the Justice Department improved its management of fraud investigations.

“If any major private law firm handled its affairs the way the Justice Department handles the defense fraud program, it would be out of business within a year,” Proxmire said in an interview.

A top Justice Department official took issue with the senators’ remarks and said the problems cited in the report are the result of decisions by Congress to cut the department’s budget requests. As a result, the department is putting its priority on prosecutions rather than on paper work.

The report, prepared by the General Accounting Office, an investigative arm of Congress, says the department’s management of defense procurement fraud investigations “could be improved.”

The report criticized the way the Justice Department oversees its defense fraud investigations and said department officials have no way of knowing how many lawyers are investigating or prosecuting defense fraud cases at any one time.

The Defense Procurement Fraud Unit, formed in 1982 to coordinate such cases, is bypassed often by investigators who submit their cases directly to U.S. attorneys with whom they have close working relationships, the report said.

Cases Pending a Year

In May, 1987, Justice Department units across the country had not reported taking action to either accept or decline 42% of the 680 defense procurement fraud cases referred to them since October, 1983. The majority of those 286 cases had been pending for a year or more.

“The Justice Department does not know what is happening with these cases,” Proxmire said. “Many of the cases are just sitting there.”

But Victoria Toensing, deputy assistant attorney general, said the GAO report shows only that the Justice Department is understaffed and overworked. She said the cases cited by Proxmire are being investigated or reviewed, even if Justice Department supervisors in Washington don’t have documentation to prove it.

Budget Squeeze Cited

“In a perfect world, it would be wonderful if we could have this kind of retrieval,” she said. “But with the level of funding in the U.S. attorneys’ offices, the attorneys make a choice. They could prosecute the cases, or they could have someone fill out the paper work.”

Toensing said the department’s Criminal Division had requested a budget of $56 million for the current fiscal year but received only $50.5 million from Congress. The U.S. attorneys, she said, asked for $413.4 million and received $380.3 million.

Proxmire said he would support increasing the funding for defense fraud investigations.

“In something as important as military procurement, it’s clear that we could save an enormous amount of money by spending a few million more,” he said.

Meanwhile, there were new reports concerning the continuing probe of defense procurement.

RCA Got Contract

Defense News, a defense industry publication, reported that former Navy research chief Melvyn R. Paisley helped RCA Corp. gain new Pentagon business after the company’s role in another big military project was cut back, in what was allegedly a quid pro quo arrangement.

The publication reported in its Monday edition that Paisley, who has emerged as a key figure in the procurement investigation, brought RCA “into the lucrative submarine electronics business” through a $2.4-billion project then known as the Submarine Advanced Combat System.

According to the publication, several sources said that competition for the project was cosmetic and that RCA had been destined to win. But the newspaper said it was unclear why Paisley, who served at the Pentagon from 1981 through April, 1987, helped RCA obtain the submarine contract in January, 1986.

Acquired by GE

Several months after the contract was awarded to RCA, the firm was acquired by General Electric. General Electric spokesman William Shuman refused to comment on the contract, saying: “As far as we know we are not part of the FBI (investigation),” Defense News said. It said Paisley’s attorney, E. Lawrence Barcella Jr., refused to discuss his client’s involvement in the project.

In its story, Defense News said Paisley’s involvement with RCA came as the company’s role in the Aegis shipboard electronics program was significantly reduced when the Navy awarded Sperry Corp. a second-source contract on the project. Sperry is now part of the Detroit-based Unisys Corp.

“RCA executives paid a call on Paisley and said: ‘Why are you messing Aegis up?’ ” the newspaper quoted one source as saying. Paisley’s “answer was ‘just shut up and accept it and I’ll take care of you in other ways.’ ”