Probe Target Unisys Ousts Managers, 60 Consultants

In the most sweeping action yet undertaken by a target of the Pentagon bribery and fraud investigation, Unisys Corp., the nation’s second-largest computer company and a leading defense contractor, announced a major housecleaning Tuesday.

In addition, Unisys disclosed that it faces three unrelated criminal investigations into alleged Pentagon overcharges.

The company suspended six employees, is ending its relationship with about 60 consultants and replaced the top managers at its 2,500-worker facility at Great Neck, N. Y., Unisys Chairman W. Michael Blumenthal said.

He said that he was “appalled and dismayed” that the company’s activities were part of the procurement fraud investigation and was “distressed . . . that a few misguided or dishonest persons may have pursued business in an unethical way.”

Blumenthal’s moves brought immediate and positive response from Wall Street analysts who had been watching the unfolding Pentagon scandal with some nervousness.

“This is certainly the nearest thing to a mea culpa that any company in the industry has issued to date,” said Wolfgang Demisch, a defense analyst with UBS Securities in New York. “Terminating consultants is pretty painless, but putting people on leave certainly suggests some people are the subjects of deep scrutiny. There is no doubt there has been improper behavior.”

Demisch added that Blumenthal’s action “confirms the reality of a (federal investigatory) case that has so far been only allegations.”

Blumenthal’s announcement was made on the same day that a federal grand jury convened in Alexandria, Va., to consider evidence in the Justice Department’s 2-year-old investigation of alleged bribery and fraud in defense procurement.

Unisys’ Great Neck division is one of two company facilities under federal investigation for alleged Pentagon procurement abuses. In all, federal investigators have searched offices of nearly 20 companies.

Blumenthal, Treasury secretary during the Jimmy Carter Administration, sent a message to all 90,000 Unisys employees that singled out activities in the Great Neck plant.

Internal Investigation

A company spokesman acknowledged that Unisys had forced Charles F. Gardner, the facility’s general manager, into early retirement nearly five months ago after former Watergate special prosecutor Henry S. Ruth Jr. conducted an internal investigation into possible irregularities at the plant.

Blumenthal said Unisys began investigating the use of marketing consultants by the Great Neck plant in the fall of 1987, before the company learned of the government’s procurement fraud probe.

He said that, although the internal investigation is not over, evidence so far “indicates that certain . . . employees and consultants appear to have had a history of engaging . . . in activities which are contrary to the policies and procedures put in place by Unisys.”

In addition to forcing Gardner, a company vice president, into early retirement last March, Blumenthal said, the company has placed on administrative leave six top-level managers at the Great Neck plant. The paid leave, he said, will continue while investigators determine “whether they engaged in any improper activity.”

Not ‘Assigning Guilt’

A spokesman said it appeared that the suspended employees “were involved in the activities being investigated. That is not to say we are assigning guilt. We are not. We are just moving people who are in a critical part of the activities that are being looked at.”

Gardner is one of the central figures in the Pentagon investigation. His home was searched last month by federal investigators looking for evidence of bribery and fraud. In addition, his dealings with at least two members of Congress, Reps. Bill Chappell Jr. (D-Fla.) and Roy Dyson (D-Md.), have drawn attention from federal agents.

Chappell and Dyson were instrumental last year in forcing the Pentagon to purchase a shipboard electronic warfare system known as MK92 Coherent Receiver/Transmitter (CORT) manufactured at the Great Neck plant. The Navy had considered the system obsolete and had sought to cancel it, but in fiscal 1987 and 1988 Congress appropriated $194 million for the CORT system.

The Aegis, a sophisticated naval air surveillance and tracking system, also is made at the Great Neck plant.

Kept on as Consultant

After his retirement, Gardner was kept on the company’s payroll as a consultant. A company spokesman said Tuesday that Gardner is no longer a consultant but refused to say when his contract was terminated.

Blumenthal confirmed reports that Unisys was terminating dozens of consultants it had hired to help it obtain defense contracts. Although the company offered no precise numbers, sources have said that contracts with as many as 60 marketing and technical firms are being canceled.

Unisys refused to identify the consultants it has terminated, but it has already been reported that they include William M. Galvin and Melvyn R. Paisley, both targets of the widening federal probe.

Blumenthal said the company is also establishing a “senior management” approval process for all future consulting arrangements and is hiring an outside law firm to help the company enforce the ethics program it introduced more than a year ago.

Former Sperry Facility

The Great Neck plant was part of the vast Sperry Corp. aerospace operations that were merged in 1986 with Burroughs Corp, one of the nation’s largest computer makers. The resulting company was named Unisys, and from the beginning Blumenthal has struggled to get a handle on the new corporation’s diverse operations.

The task has proved formidable. About a year and a half after the merger, Unisys sources say, reports began to surface about possible irregular uses of consultants at the Great Neck plant, specifically at its Surveillance and Fire Control Division.

Ron Terpak, previously a vice president and general manager of Unisys’ defense systems, was named last week to oversee operations at the plant. In his previous capacity, Terpak was responsible for all Unisys defense operations, a $2.5-billion-a-year segment of the corporation that accounts for 25% of its total business.

3 Other Federal Probes

In addition to the investigation into procurement practices at Great Neck, Blumenthal said Unisys hopes to resolve three unrelated federal investigations stemming from premerger activities at former Sperry defense plants.

One involves allegations of improper charging on contracts for the Army at Ft. Huachuca, Ariz. A second involves an investigation in Montgomery, Ala., into the administration of a contract with the Air Force. The third involves an inquiry into the pricing practices by a now-divested former Sperry unit in Albuquerque, N. M.

Staff writers Gregory Crouch and Ralph Frammolino contributed to this story.