In a case widely considered a prototype for the current nationwide investigation of Pentagon procurement fraud, a Van Nuys defense contractor has agreed to plead guilty to a felony conspiracy charge of corrupting the procurement system to obtain inside information on major Air Force contracts.
ITT Corp.'s Gilfillan division, a defense electronics manufacturer with 1,800 employees, was accused of plying civilian contracting officers at a Massachusetts air base with meals, liquor, theater tickets and golf outings in exchange for sensitive Air Force planning documents and data about competitors’ bids.
Federal prosecutors in Boston agreed late Thursday to drop three other felony charges that ITT-Gilfillan illegally obtained Air Force records, the company confirmed. U.S. District Judge David S. Nelson of Boston could fine the firm as much as $500,000 for the single count of conspiracy.
ITT, an international conglomerate based in New York, had vigorously fought the June, 1987, indictment, contending the case was an unprecedented attempt to “criminalize” the everyday exchange of information that undergirds the military procurement process.
Upset About Plea
But senior officials said the firm was left with little choice but to plead guilty once Edward M. Vicenzi, the former ITT-Gilfillan marketing representative who actually gathered the inside information, entered a guilty plea himself late in July. Vicenzi was expected to testify against his former employer.
“We are distressed and disturbed that we had to settle this case by pleading guilty,” said D. Travis Engen, the ITT senior vice president who heads the firm’s defense operations. “We did so as a matter of corporate prudence in the aftermath of the former employee’s guilty plea.”
ITT-Gilfillan was suspended from receiving military contracts for four months last year following the indictment. A further suspension is possible on account of the guilty plea, but is considered unlikely.
As a rare test of the ends to which defense contractors can go in gathering information about defense purchasing plans, the case spawned considerable anxiety on the part of defense contractors. Their interest only heightened in the wake of the disclosure last June of Operation Ill Wind, a nationwide federal investigation of alleged bribery and fraud at the highest levels of the Pentagon procurement system.
Similar Probes Under Way
Lawyers said the ITT-Gilfillan case, had it gone to trial later this month as scheduled, might have given an indication how judges and juries would react to the charges expected to flow from Ill Wind. It also could have helped set the ground rules for the aggressive hunt for information about Pentagon purchasing plans that is at the heart of both cases.
Frank L. McNamara, the U.S. attorney in Boston, could not be reached for comment Friday. But in a recent interview, he described the case as “prototypical.”
“Not only did it predate Ill Wind, but it does contain within it elements which you can see emerging in some of these other investigations,” McNamara said. “There’s a lot there in microcosm.”
By wining and dining his contacts at the Air Force Electronic Systems division in Bedford, Mass., in 1984 and 1985, Vicenzi was able to obtain proprietary information about two Air Force contracts sought by ITT-Gilfillan, the government said.
Early in 1984, according to the indictment, Vicenzi passed along to his ITT-Gilfillan supervisors the Air Force’s cost estimate for MPN-XX, a rapidly deployable mobile air traffic control radar system that was expected to cost $150 million.
“This is extremely sensitive information,” he wrote on the document.
Later, he got hold of preliminary specifications, cost estimates and the minutes of an Air Force procurement executives’ meeting on ARM DECOY, a proposed $80-million system to protect radar sites by decoying anti-radiation missiles.
Neither system was ever built, although ITT-Gilfillan won a $6.4-million development contract for ARM DECOY.
The indictment charged that Vicenzi went so far as to steal one sensitive document off a worker’s desk at the Electronic Systems division and make a copy for ITT-Gilfillan. Company officials, the government said, destroyed documents in the firm’s Bedford office when they learned that federal agents had searched Vicenzi’s home in nearby Wellesley.
Vicenzi is awaiting sentencing in the case.
He already has served 60 days in federal prison after pleading guilty to making payoffs to Air Force officials for information sought by a Virginia engineering firm that was a client of the defense consulting firm he established after quitting his job at ITT-Gilfillan in 1985. He has not been sentenced in a third case, involving similar payoffs on behalf of St. Louis-based Emerson Electric.
No Air Force officials were charged in the ITT-Gilfillan indictment. But in the other cases, two Electronics System division officials pleaded guilty to accepting illegal payments from Vicenzi and lost their government jobs.
At least two ITT-Gilfillan employees in Van Nuys were fired as a result of the government investigation. Those workers--a director of marketing and the firm’s vice president for business development--have filed lawsuits against ITT in Los Angeles County Superior Court, claiming that they had fully cooperated with the investigation and had at all times followed company policy in their dealings with Vicenzi.
Higher Prices Predicted
ITT’s lawyers had insisted, before agreeing to the guilty plea, that defense contractors were accustomed to receiving from military procurement officials precisely the kinds of planning data that the Gilfillan division was accused of obtaining through a criminal conspiracy.
Cutting off that exchange, they said, would make it harder for contractors to offer responsive bids on Pentagon contracts and for the government to negotiate the lowest possible prices for its military needs.
“Information flows both ways, and when you try to generally criminalize that, it’s like cutting off your nose to spite your face,” said Thomas L. Patten, the Washington attorney representing ITT-Gilfillan.