Small Company in Pentagon Probe Closes After Unisys Cuts Off Contract Payments
Unisys Corp., in another effort to purge links with the Pentagon procurement scandal, Wednesday abruptly suspended contract payments to a small Florida firm that was searched by investigators for evidence of possible illegal payments to federal officials.
The company, Armtec Inc., based in this small north Florida community, had worked almost exclusively as a subcontractor to Unisys on a Pentagon weapons project and was forced to shut its doors and lay off all of its 89 employees, management spokesmen said.
“We are shut down as of 4:50 (Wednesday) because of Unisys,” a tearful Connie Hilton, the company’s assistant controller, said. Hilton said that Unisys had notified Armtec executives by telephone late Wednesday that “there would be no more funds as of today,” and Armtec decided immediately to lay off its employees until further notice.
Company Probe Confirmed
A Unisys spokesman, William Beckham, said late Wednesday that he would be unable to provide details about the company’s decision until today. But he confirmed that the company had been conducting a special investigation of its relationship with Armtec.
Wednesday’s action followed a sweeping decision by Unisys two weeks ago to suspend six employees, end its relationship with about 60 consultants and replace the top managers at its 2,500-worker facility at Great Neck, N. Y. Unisys Chairman W. Michael Blumenthal said then that he was “distressed . . . that a few misguided or dishonest persons may have pursued business in an unethical way.”
Armtec executives have confirmed that the reason the company was located in Palatka, a town of 10,000, was because it is in the district of Rep. Bill Chappell Jr., the Democratic chairman of the House Appropriations Committee’s defense appropriations subcommittee.
The Armtec plant was one of 44 businesses, homes and offices searched by federal investigators in June when the mammoth fraud probe was publicly disclosed. It is connected with several persons whose activities are being scrutinized in the investigation.
Made Harnesses
The company was founded in October, 1986, by former Unisys executive William W. Roberts to produce wiring harnesses for a shipboard electronic warfare system made at the Unisys plant in Great Neck. The contract was provided by Charles F. Gardner, the Unisys vice president responsible for the Great Neck plant. Washington-based consultant William M. Galvin was a co-founder of Armtec and provided a large share of the original $100,000 invested in the company.
The offices of Gardner and Galvin were also searched by federal agents, and investigators have confirmed that Roberts is a subject of the investigation.
Federal officials have confirmed that they are investigating whether benefits may have been funneled through Armtec to unnamed federal officials who had influence over defense projects pushed by some companies.
According to a transcript of a federal wiretap obtained by NBC News, Gardner told a political consultant working for Chappell to bill Armtec for a trip the consultant planned to make to Chappell’s district to advise him on his reelection campaign. Chappell has denied receiving any improper benefits.
Additionally, search warrants unsealed by a federal judge in Brooklyn, N. Y., on July 21 indicated that investigators are pursuing leads suggesting that Unisys employees and others may have acted “to corruptly give, offer and promise things of value to public officials to illegally influence the defense contracting business.”
The warrants showed that investigators sought evidence “pertaining to schemes to defraud Unisys by diverting monies to other individuals and business entities to illegally influence the defense contracting process and for their own personal use.”
Forced to Resign
Unisys forced Gardner to resign five months ago after an internal company investigation into possible irregularities at the plant. Unisys has since started another investigation into Gardner’s dealings with Chappell and Rep. Roy Dyson (D-Md.), a company source confirmed.
Armtec reported revenues of $489,000 in 1987, its first year of operations. The company recently obtained small contracts from two other defense contractors, United Technologies Corp. and Diagnostic-Retrieval Systems Inc., but nearly all of its income comes from Unisys, management officials said.
The company, which operated out of a one-story brick building, provided a valuable source of jobs for Palatka, which is situated 45 miles east of Gainesville and had suffered from high unemployment.
“We’ve been fighting for our lives and our jobs . . . “ said Armtec officer Hilton, a Palatka native. “Half of my employees were on welfare and food stamps when this company opened. It’s bad for the town. It breaks my heart to see what happened today.”
Douglas Jehl reported from Washington and Josh Getlin from Palatka.
