McDonnell Douglas to Probe Use of Defense Officials as Consultants

McDonnell Douglas, the nation’s largest defense contractor, has launched an internal investigation into its use of former top-level Defense Department officials as procurement consultants, the firm’s chief executive said Thursday.

The St. Louis-based company’s relationship with Melvyn R. Paisley, who became a consultant to McDonnell Douglas after leaving his post as assistant Navy secretary in April, 1987, is a central focus of the nationwide federal investigation into possible bribery and influence peddling in Pentagon purchasing.

In an open letter to employees, Chairman and Chief Executive John F. McDonnell said the firm was confident that its policies for employing and supervising consultants were sound. Nonetheless, McDonnell said a task force, consisting of senior managers and outside lawyers, had been named to determine whether additional guidelines were needed.

“We want to leave no doubt that McDonnell Douglas believes in and acts in accordance with the highest ethical standards,” he said.

The internal inquiry is separate from a wide-ranging review McDonnell Douglas initiated days after its St. Louis offices were searched by federal investigators June 14, according to Jim Reed, a company spokesman.

Unisys--another target of the procurement investigation--announced last month that it had suspended six employees and canceled all its consultants’ contracts in the wake of the federal probe. Unisys Chairman W. Michael Blumenthal said at the time that he was “appalled and dismayed” by the conduct alleged by investigators.

Allegations Against Paisley

After working for the Navy from 1981 to 1987, Paisley became a consultant to a number of Pentagon contractors. McDonnell Douglas terminated its three-year consulting pact with Paisley in mid-July, some 20 months before it was due to expire, Reed said.

Federal investigators searched Paisley’s suburban Washington home in June. Court documents indicate that authorities were looking for any evidence that he took payments from McDonnell Douglas and General Dynamics while he was the Navy’s most powerful procurement official, according to court records.

In court filings, investigators have also alleged that Paisley helped steer a $4.4-billion development contract for the Navy’s advanced tactical aircraft to a team including McDonnell Douglas.

Investigators have also alleged that later, while Paisley was a consultant to the company, he improperly provided McDonnell Douglas with secret government documents regarding overseas sales of F-18 fighter jets, bids for the advanced tactical aircraft project and inside information about its competitors’ Pentagon business.

Suggested Applications

In his letter to employees, which the company made available to The Times, McDonnell said Paisley’s work for the firm on the advanced tactical aircraft project--on which McDonnell Douglas is teamed with General Dynamics--”was inconsequential and could not have had any impact on the Navy’s contract award.”

Generally, Paisley’s job was to help McDonnell Douglas “by assessing our advanced technologies and offering suggestions on how they should be applied to the marketplace,” McDonnell said. He promised further details in a future communique on Paisley’s role in the advanced tactical aircraft competition.

McDonnell also offered a brief description of the company’s dealings with Adm. James A. (Ace) Lyons, who had a six-month consulting contract with McDonnell Douglas after he retired last fall as commander-in-chief of the Navy’s Pacific fleet. Federal investigators searched McDonnell Douglas’ headquarters in June for information relating to Lyons’ relationship with the firm.

Lyons was to advise the firm on selling F/A-18 fighters to South Korea, according to McDonnell.

“As a former top officer who was a major user of our airplanes and who was respected by the Koreans, he was an effective advocate,” McDonnell said. “His role was intended to be equivalent to that provided our competition by consultants who were retired Air Force officers.”

The company did not renew its agreement with Lyons when it expired last spring.