Navy Official Was Paid for Bid Help, Court Papers Say
A Navy purchasing official received regular payments from consultants working on behalf of a major defense contractor in exchange for his aid in bidding on a $16-million contract for Navy electronic equipment, prosecutors charged in court documents unsealed Tuesday in New York.
The documents, part of the massive defense procurement fraud investigation disclosed last spring, provide the most detailed picture so far of the active role that federal investigators believe a government official played in at least one facet of the scandal.
The Navy official, Stuart E. Berlin, allegedly not only provided crucial “inside information” to a consultant hired by Hazeltine Corp., which was seeking the contract, but worked within the Navy to try to limit competition from other companies bidding on the project.
In return, Alexandria, Va., consultant William L. Parkin and an associate, Fred H. Lackner of Woodland Hills, Calif., periodically made $1,000 cash payments to Berlin, according to a search warrant affidavit prepared by federal prosecutors last June.
Allegations of payoffs for confidential data are at the heart of the federal investigation into military weapons-buying that first surfaced last June, when federal agents searched the homes and offices of more than 40 Pentagon officials, defense industry consultants and military contractors.
The searches capped a two-year inquiry into alleged fraud, bribery and influence peddling in the $150-billion-a-year military procurement system. Law enforcement officials have described the investigation as the broadest inquiry ever into corruption in military purchasing.
The investigation, directed by Henry E. Hudson, U.S. attorney for the Eastern District of Virginia, is expected to yield its first indictments soon, perhaps as early as Friday. The Hazeltine firm, Parkin, Lackner and Berlin are among the subjects of the inquiry.
According to sources close to the investigation, the case is being built in stages, with relatively minor players being pursued first in hopes that they will provide information on higher-ups, including former Assistant Navy Secretary Melvyn R. Paisley, one of the prime targets of the inquiry.
Other Top Probe Targets
High-powered industry consultants William M. Galvin and Charles F. Gardner are also known to be among the prosecutors’ top targets. Investigators say that they are suspected of using their contacts inside the Pentagon to illegally help their numerous corporate clients obtain Defense Department business.
The court document unsealed Tuesday provided the prosecutors’ justification for searching the office of Joe Colarusso, a Hazeltine senior vice president working from the firm’s Greenlawn, N.Y., facility. The allegations are based largely on conversations recorded from a tap on Parkin’s telephone.
The warrant details Hazeltine’s efforts in 1987 and 1988 to obtain a $16-million contract for a device to test Navy radar systems, a move that collapsed after the federal investigation was disclosed last summer. It includes also allegations about Hazeltine’s attempts to obtain two other multimillion-dollar Navy electronics contracts.
On the radar systems contract, the affidavit alleges, Hazeltine was on the brink of being eliminated until Berlin interceded on its behalf with his colleagues.
Hazeltine is a subsidiary of St. Louis-based Emerson Electric Co., which in 1987 did $366-million worth of business with the Defense Department, making it the nation’s 43rd-largest defense contractor.
A Hazeltine spokesman said in a prepared statement Tuesday: “Hazeltine continues to cooperate fully with authorities and has no further comment at this time.” The firm earlier acknowledged that it was a target of the government investigation.
Colarusso and Hazeltine’s Washington marketing representative, Charles Furciniti, hired Parkin to obtain information from the Navy about its procurement plans, for which the firm agreed to pay Parkin $2,000 a month, according to the warrant.
Parkin turned to his friend Lackner, who had a long relationship with Berlin, head of the ship systems engineering branch of Naval Air Systems, investigators said in the court document.
“Lackner once told Parkin that the information Berlin provided was information that the company could not obtain on its own,” the affidavit states.
The warrant says that Parkin agreed to split his $2,000 monthly fee with Lackner for any relevant information Lackner could glean from Berlin to help Hazeltine obtain Navy business.
“Then, apparently every few months, Parkin and Lackner each contributed $500 cash and Lackner paid that to Berlin,” the document states. “Lackner told Parkin that the payments were made, and FBI surveillance once observed Lackner meet Berlin when a payment was scheduled to be made.”
Berlin’s lawyer, Jeffrey Harris, could not be reached for comment Tuesday. But, in an earlier interview, he said that the government case is built wholly on circumstantial evidence and that Berlin never took payments from defense consultants.
William Dougherty, Lackner’s attorney, when asked whether his client had paid Berlin for confidential Navy data, said: “No way. No. No. No.”
Dougherty acknowledged that Lackner may be indicted. “It wouldn’t surprise me, but it doesn’t mean they have any evidence,” he said in an interview Tuesday.
The government warrant alleges that Parkin and Lackner discussed additional payments that they could expect from Hazeltine if the company received the Navy contract.
“Parkin mentioned the amounts of $30,000 and $50,000 in that regard,” according to the warrant.
Gerard F. Treanor, Parkin’s attorney, said that the government has “grossly overstated” Parkin’s role.
“Let’s see if the assumptions and suppositions the FBI agent makes (in his affidavit) stand up in front of a jury . . . . We anticipate his being indicted and I anticipate his being acquitted,” Treanor said.
According to the affidavit, the two consultants operated in secrecy, with Lackner once traveling across the country to meet face to face with Parkin because the information gleaned from his Pentagon source was “so ‘hot’ they did not want to pass it on the telephone,” the court document alleges.
According to the picture painted by the affidavit, Berlin served from his Pentagon office as the vital source in an information pipeline, providing to Lackner--in return for bribes from him--the inside guidance that eventually enabled Hazeltine to design its bid to fit the Navy’s specifications precisely.
Under the arrangement worked out between the two consultants, the document alleges, the information was then passed from Lackner to Parkin, who shared it in turn with his clients at Hazeltine.
The document alleges that Hazeltine representatives were culpable as well, and it cites a wiretapped conversation in which Colarusso, the Hazeltine vice president, asks Parkin whether Berlin was being “looked after.”
Leak of Budget Claimed
While Hazeltine was preparing to bid on the electronics contract for the UPM-150 system in February, 1987, according to the document, it was able to learn from Parkin exactly how much money would be budgeted by the government for the project and the estimated quantities that the government planned to buy.
Hazeltine was also able to communicate its preferences to Berlin as well, the document says.
After becoming concerned in the spring of 1987 that the bidding competition might be widened to include companies other than itself and Gould Inc., its Illinois-based chief rival for the project, Hazeltine told Parkin that it would prefer to have only one competitor.
Subsequently, it said, Lackner reported that Berlin was seeking to persuade his Navy colleagues to agree to the limit. When the Navy was trying to decide how to weigh the two proposals that fall, Colarusso transmitted Hazeltine’s preferences.
Ultimately, the affidavit suggests, Berlin became both an advocate and a strategic adviser for Hazeltine, communicating--through Lackner and Parkin--his advice on the company’s bidding strategy.
His help proved crucial, the affidavit says, when Hazeltine submitted a bid far more costly and less sophisticated than its competitor’s. After meeting with Berlin, Lackner told Parkin that “Berlin had a tough time saving Hazeltine” from being eliminated by Pentagon officials from the competition.
Staff writers Ronald J. Ostrow in Washington and Carla Lazzareschi in Los Angeles contributed to this story.