Prosecutors Contend Rockwell Lawyers Aided Cover-Up in Double-Billing Case
Federal prosecutors have alleged in court papers that lawyers employed by Rockwell International Corp. directed a cover-up of fraudulent double-billing in a government contract to build navigation satellites.
The role of these unnamed corporate lawyers included providing misleading statements for Rockwell executives to use when questioned by government auditors in 1985, according to charges contained in the court documents.
The allegations surfaced this week in the criminal fraud case against Rockwell and two former executives of the firm’s Seal Beach facility accused of overbilling the Air Force $450,000 on a contract for a satellite navigation system.
The 25-count indictment handed down in January also accuses the firm of contempt of court for allegedly violating a 1982 order that prohibits the firm from submitting false claims to the government, which stemmed from an earlier allegation of misbilling in the same NAVSTAR satellite program.
The unnamed lawyers “dictated” false statements made to defense department auditors by defendants Donald H. Carter, former material director, and Robert L. Zavodnik, former subcontracts manager, according to the government.
“The evidence indicates that the advice tendered went beyond traditional legal advice and that instructions to commit crimes were communicated,” according to documents filed by Assistant U.S. Atty. George B. Newhouse Jr.
The government’s position could bolster the defense of Carter and Zavodnik. Both men have pleaded not guilty to the charges and recently claimed that they acted “in good faith at the direction of, and with the assurances of, Rockwell management and in-house counsel.”
Carter’s lawyer, Robert Perry, said he had not seen the new government papers but would read them “with great interest.”
Thomas E. Holliday, an attorney representing Rockwell, rejected the latest allegations.
“We deny the allegations and the insinuation and know it to be patently false. And we will vigorously oppose the government’s motion,” Holliday said, declining further comment.
Prosecutors seek to force disclosure of portions of Rockwell’s internal investigation into the double-billing. Rockwell claims that the documents are covered by the attorney-client privilege and may not be viewed by others.
Newhouse has argued that the communications assisted Carter and Zavodnik “in the commission of a crime or perpetration of fraud.” Legal doctrine strips the privilege from lawyers when it is shown they helped formulate fraudulent or criminal activities.
Rockwell has contested the fraud charges. The firm has argued that prosecution should not be allowed because it voluntarily disclosed the billing irregularities to the government under a Reagan Administration program designed to encourage defense contractors to police themselves for wrongdoing.
The case is pending in Los Angeles before U.S. District Judge Consuelo B. Marshall.
