Fraud Fallout: Unisys to Lay Off Consultants

Unisys Corp., in a sweeping response to the federal investigation into Pentagon fraud, said Thursday that it will lay off virtually all the defense consultants it has employed to help it obtain defense contracts.

A Unisys spokesman refused to say how many consultants are involved, but a source close to the company said he understood that contracts with at least 60 marketing and technical firms are being terminated.

The multinational computer and defense firm is a prime target of scrutiny in the widening probe of bribery and bid-rigging in the defense contracting process. Unisys plants in New York and Minnesota were searched by federal agents for evidence last month, and nine persons suspected of possible wrongdoing have ties to the company.

The move came as other defense contractors named in the probe--including Varian Associates and McDonnell Douglas--indicated that they too are reevaluating their relationships with consultants and might soon eliminate their contracts with them.

“We are taking this very seriously,” said Gary Simpson, a spokesman for Varian, whose Dallas-based subsidiary, Continental Electronics, was searched in the investigation. “We are going to take a hard look at this.”

The role played by consultants has come under scrutiny as federal investigators have alleged that some apparently acted as illicit middlemen, buying confidential information from Pentagon employees and selling it to contractors. The information was believed to have provided their clients with an unfair competitive advantage in bidding on Defense Department contracts.

Unisys, formed in 1986 by the merger of Burroughs and Sperry, employs 90,000 and had sales last year of $7.4 billion. Among the major defense contracts held by the company is the Aegis radar defense system.

A company spokesman, William Beckham, said the decision to lay off consultants “was more financial than anything else,” but conceded that the Pentagon investigation was “certainly an added impetus.”

He said the company had decided to “eliminate its consulting expenses,” but said some consultants might be rehired on a “case-by-case” basis if a clear need for their services could be demonstrated.

But Leonard Maley, an Alexandria, Va.-based consultant who learned by mail of his dismissal by mail early this week, said he did not believe that economics had anything to do with the decision.

“They got up one day and found themselves on the front pages across the country,” Maley said. “They decided to clean house and throw everybody out.”

Among the persons whose homes were searched in the federal probe were Charles Gardner of Great Neck, N.Y., who resigned this March as a company vice president. Others included are Unisys marketing managers Dennis Mitchell and James Roberts; former marketing managers James Rapinac, Fred Lackner, Thomas Muldoon, William Sanda, and former program manager William W. Roberts.

Defense Secretary Frank C. Carlucci told the Senate Armed Services Committee this week that he planned to send a letter to the nation’s 200 top defense contractors urging them to impose strict controls over their use of consultants.

A spokesman for United Technologies, Larry Bingaman, said the firm’s relationship with consultants was being reviewed as part of a larger examination by senior executives of the company’s defense contracting policies. He refused to say whether the company had severed its relationship with any consultants.

A spokesman for McDonnell Douglas, Jim Reed, said the company had reviewed only the consulting contracts it held with former Assistant Navy Secretary Melvyn R. Paisley and Adm. James Lyons, both of whom have been named in the case.

General Dynamics, which did not employ any of the consultants targeted in the probe, said it had nevertheless launched an internal review. “Because of our sensitivity to the issue, we’ve gone back and are looking more closely at everything, including our relationship with consultants,” said Joe Sutherland, a spokesman for the company.

And another Washington-area consultant, who had worked for a defense contractor named in the investigation, said he too learned by mail that his services would no longer be required.

The letter explicitly stated that “the Pentagon scandal” had forced the company to lay off half its defense consultants, said the consultant, who asked to remain anonymous.

Times Staff Writers Daniel M. Weintraub in Washington and George Frank in Los Angeles contributed to this story.