Cubic Banned From Classified Contracts : 30-Day Prohibition Follows ‘Unsatisfactory’ Defense Security Rating

The Department of Defense has prohibited Cubic Corp. from receiving new classified contracts for 30 days after an inspection revealed the company’s failure to adequately secure classified information at its Defense Systems subsidiary, a Defense Department spokesman said Wednesday.

The “unsatisfactory” security rating, issued Sept. 13, would not necessarily affect Cubic’s existing contracts, Defense Department spokesman Dale Hartig said. However, Pentagon contracting officers can review existing contracts because of the security problems, Hartig said.

San Diego-based Defense Systems generated $10.6 million of Cubic’s $19.7 million in operating profit for the year ended Sept. 30, 1987.

The August inspection follows a similar inspection conducted last spring that uncovered similar problems at Defense Systems, according to Hartig. Defense Investigative Service inspectors will review Cubic’s security rating in October to determine whether problems have been corrected, Hartig said.

The ban on new classified defense contracts would be lifted if DIS investigators are satisfied with Cubic’s new security arrangements, Hartig said.

Cubic spokesman Jerry Ringer said, “We have taken the posture that we cannot comment on it because it deals with national security.”

Defense Department officials declined to describe what type of classified information Cubic had mishandled. DIS “doesn’t discuss the nature of inspections or any specific shortcomings because to do so would further compound security weaknesses,” Hartig said.

However, the San Diego Union on Wednesday reported that DIS investigators uncovered “nine serious deficiencies” in Cubic’s handling of sensitive computer data generated by air combat training systems that Cubic has installed at military air bases around the world.

The DIS investigation evidently was not related to an ongoing federal probe into possible defense procurement fraud. As part of the nationwide investigation, federal agents have searched the offices of Cubic and nearly 30 other defense contractors and defense consultants.

A Cubic official has acknowledged that FBI agents who searched Cubic’s San Diego offices in July were looking for documents pertaining to Cubic’s Top Gun air combat training system. Federal agents who searched the Washington offices of defense consultant William M. Galvin also were seeking information about Cubic’s training system.

Cubic has used Galvin as a consultant in the past, according to company spokesman Ringer.