Payments to Resume : Firms Welcome Carlucci's Switch on Work for Navy

Times Staff Writer

The nation's aerospace industry, distressed by the Pentagon's decision last month to freeze some Navy contracts in connection with the defense procurement scandal, expressed relief at Defense Secretary Frank C. Carlucci's decision Monday to resume payments.

"We have been trying to say--right from the very start--that there are 3 million people in the aerospace and defense industries and we hate to see all of them tarred with the same brush," said a spokesman for the Aerospace Industries Assn. "It's a good thing that he's done."

"We are pleased that they took this action so quickly," said Litton Industries spokesman John Thom. "We saw no reason why they suspended the payments in the first place."

A contract awarded to Litton, based in Beverly Hills, was the second largest of those affected by Carlucci's suspension of $1.2 billion worth of Navy programs on July 1. The suspension was ordered after search warrant affidavits were unsealed in Dallas in the ongoing Pentagon procurement investigation.

No Evidence Contracts Tainted

On July 1, Carlucci said the Pentagon would freeze the nine contracts until the Navy could determine if any of the contracts were tainted. On Monday, the Pentagon said it completed that review of information made public and found no indication that the contracts were tainted.

As a result, the department resumed payment to nine defense contractors:

- Unisys in a $712-million anti-submarine warfare program.

- Litton Industries in a $150-million program to develop a handheld digital radio transmitter.

- TRW on a $36.7-million anti-submarine warfare contract with the company's space and defense sector.

- ITT on a $51-million fiber optics program.

- Varian Continental Electronics on a $6.3-million very low frequency transmitter.

- Loral Terracom and Canadian Commercial on a $49-million radio program.

- Hughes Aircraft and Raytheon Corp. on a $38-million carrier combat direction system.

TRW spokeswoman Julie Wright said TRW was pleased by the announcement. "We initially said that to the best of our knowledge that we were not one of the companies under investigation, and (we) were gratified that the Department of Defense moved so quickly to clear the (anti-submarine) contract," Wright said from her Redondo Beach office.

The TRW contract, which was part of a much larger program to build shore-based centers to detect enemy submarines, is with the company's group in Fairfax, Va.

"We're pleased we can get back to work without this cloud of suspicion," said Dan Reeder, a spokesman for Hughes Aircraft's ground systems division in Fullerton. "We were being pulled into this investigation through no fault of our own. We were suddenly being tainted by the whole idea, and that didn't please us."

Carlucci's initial order and Monday's announcement are being scrutinized by the defense industry for clues as to how the Pentagon will handle future disclosure in the unfolding procurement scandal.

"The suspension of the contracts wasn't going to drive any of these companies to the wall, but it was going to make life more difficult from a cash-flow standpoint," noted Robert Hanisee, defense analyst with Seidler Amdec Securities in Los Angeles.

Another industry executive who requested anonymity said she hoped that the government would "come up with a good process" for dealing with disclosures in the future.

She was referring to how the search warrant affidavit was made public in Dallas and followed by the Defense Department's decision to freeze contract payments and investigate companies.

"I am just very happy that they turned around so quickly," the executive said. "I hope they find a better way in the future to deal with things like this without dragging the innocent through the mud to get to the guilty."

"Let's be calm for a while until we know more," said Herb Hetu of the Aerospace Industries Assn.

Times staff writers Gregory Crouch and David Olmos contributed to this story.

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