1st Defense Fraud Indictments Made : Teledyne, 3 Executives, Navy Official, 2 Consultants Named by Grand Jury

Times Staff Writer

The government Friday brought the first charges in the Pentagon fraud case, accusing a unit of Teledyne Inc., three Teledyne executives, a Navy official and two defense consultants with crimes that include racketeering, conspiracy, bribery and theft of government property.

The indictments followed guilty pleas earlier Friday on similar charges from defense supplier Hazeltine Corp., two of its former officers and a Washington marketing official for Teledyne. Hazeltine agreed to pay $1.9 million in fines for its part in a scheme to pay a Navy contract officer for inside information on a Pentagon electronics program.

The long-awaited charges in the Operation Ill Wind investigation provide the outline of the government’s case against Pentagon officials, weapons makers and consultants who allegedly bought and sold confidential information so that they could profit from the $150-billion-a-year military purchasing system. All those named in the indictments handed down Friday denied their guilt.

Predicts More Charges


Henry E. Hudson, U.S. attorney for the Eastern District of Virginia, who is supervising the inquiry, said that Friday’s 27-count indictment represented “a small percentage” of the larger government corruption case he is building. He predicted that more charges would be filed in coming months.

“The citizens of the United States, I believe, have an absolute right to the honest services of public officials,” Hudson said at a press conference announcing the indictments returned by the Alexandria, Va., grand jury. “And when individuals are receiving money for violating rules and regulations, passing confidential information, I think it strikes at the very heart of the procurement process.”

While the indictments cite little hard evidence of payoffs, wiretapped conversations between the consultants and contractor executives contain barely disguised references to money as “a little green” and “a lot of spaghetti and meatballs.”

The companies and individuals who were charged or who pleaded guilty Friday form a relatively small circle that Hudson and the Justice Department hope to widen to ensnare a much larger number of big players, including some of the nation’s top defense contractors.

Agree to Cooperate

The Hazeltine and Teledyne executives who admitted guilt have agreed to provide evidence against others in the continuing investigation, Hudson said.

Among the firms and persons charged:

--Teledyne Electronics in Newbury Park, Calif., a unit of Los Angeles-based Teledyne Inc., which was accused of trying to bribe a Navy official to help win a $24-million electronics contract. The firm, the nation’s 41st-largest defense contractor, faces fines of up to $6.5 million.

Teledyne said in a prepared statement that it “will defend itself against the charges and expects to be acquitted.” The company denied that its conduct had been criminal and said that the charges “unfairly attempt to implicate them in actions that may have been taken by others.”

--Teledyne executives George H. Kaub, Eugene R. Sullivan and Dale Schnittjer, who were charged with conspiracy, bribery of a public official and wire fraud. Each faces jail terms of 50 years or more and fines of at least $1.5 million. Teledyne said that it would support the executives’ defense efforts.

--Stuart E. Berlin, a $74,304-a-year Navy electronics engineer who was accused of conspiracy, bribery, wire fraud and theft of government property. He also was charged with racketeering and conspiracy to engage in racketeering activities under the federal Racketeer Influenced and Corrupt Organizations Act. The crimes carry maximum penalties of 185 years in prison and fines of as much as $5.5 million.

--Fred H. Lackner, a Woodland Hills defense consultant and close friend of Berlin, who faces the same charges and potential penalties.

--William L. Parkin, a consultant from Alexandria, Va., also was charged with racketeering, conspiracy, fraud and theft of government property. He, too, faces 185 years in jail and $5.5 million in fines.

‘Justice Will Be Done’

Jeffrey Harris, a lawyer for Berlin, said: “We will proceed to trial, and I’m confident that justice will be done and Mr. Berlin will be acquitted.”

A Navy spokesman, Lt. Brian Cullin, said Friday that Navy officials are reviewing the allegations against Berlin, a civilian employee who was removed from procurement duties in June after the probe became public. “They’ve got to review how serious the indictment is” before deciding what further action to take, if any, Cullin said.

Gerard F. Treanor, Parkin’s lawyer, said that his client would plead not guilty and predicted he would be acquitted.

Lackner’s attorney, William Dougherty, repeatedly has denied any wrongdoing by his client. “Mr. Lackner never paid Mr. Berlin 1 cent,” he said Friday.

The men operated a simple scheme, according to the indictment.

Teledyne hired Parkin to help them win a contract from the Navy and Air Force for an aircraft electronics test kit known as the AN/APM 424, a hand-held device for checking radar sets. Parkin was to be paid $160,000 for his efforts if Teledyne won the contract.

Parkin allegedly turned to his friend Lackner for help because of Lackner’s access to Berlin, who held a key position in the Naval Air Systems Command overseeing selection of a firm to supply the test kits. Parkin agreed to split his consulting fees from Teledyne with Lackner, Berlin and Michael Savaides, Teledyne’s Washington marketing representative, the indictment alleges.

‘Silent Partner’

Berlin, for his part, regularly provided Lackner with detailed information on the program and served as the consultants’ “silent partner” in helping Teledyne win the contract, according to the government charges.

Payments to Parkin’s firm, Crest Inc., were authorized by the Teledyne executives, Sullivan and Kaub, the indictment states. Between December, 1985, and April, 1986, they issued checks to Crest totaling $10,630.

Prosecutors charge that Teledyne lied to the Air Force when it certified that it had not hired any person or firm to help win the contract and had not promised money to anyone contingent on obtaining the contract. The government alleges that Teledyne executives promised Parkin a separate bonus of $150,000 if the company won the bidding.

After Teledyne won the contract in mid-1987, the company agreed to pay Parkin $6,250 a month for future consulting services. The government alleges that the payments were in fact his reward for assisting on the radar test kit contract.

Under FBI Surveillance

Parkin in turn began issuing checks to Lackner and Savaides, who arranged to pay Berlin in cash, according to the indictment. On March 2, 1988, the government charges, Lackner and Savaides withdrew cash from a bank in Arlington, Va., while under FBI surveillance, and later that day Lackner met with Berlin, presumably to make the payoff.

Again on May 3 and May 27, prosecutors allege, Parkin, Lackner and Savaides made cash payments to Berlin.

Earlier Friday, Hazeltine and three individuals agreed to waive indictment and plead guilty to similar charges stemming from the fraud investigation. All had reached plea agreements with prosecutors under which they will face no further charges.

Guilty Pleas

Those who entered guilty pleas before U.S. District Judge Claude M. Hilton:

--Hazeltine Corp., which pleaded guilty to separate criminal counts of fraud, conversion of government property and filing a false statement. Hazeltine agreed to pay a total criminal fine of $1 million and separate civil claims totaling $500,000. It agreed also to reimburse the government $410,000 to cover costs of the investigation. The government declared that Hazeltine had “cooperated fully” in the investigation.

--Joseph R. Colarusso, an executive vice president at Hazeltine’s offices in New York, who pleaded guilty to a single count of fraud and conspiracy.

--Charles A. Furciniti, vice president of marketing at Hazeltine’s offices in Alexandria, Va., who pleaded guilty to a single count of the same offense. The maximum penalty for the charge is five years in prison and a fine of $250,000.

--Savaides, a marketing representative for Teledyne Electronics at the branch office in Arlington, Va., with responsibility for Navy procurement. Savaides pleaded guilty to a single count of conspiracy to commit bribery, which carries a maximum penalty of five years in jail and a fine of $250,000.

The sentences for each of the individuals are to be determined by a judge at a later date. However, in all three cases the prosecution indicated that it would seek relatively light sentences because of their promises of cooperation.

Also Tied to Hazeltine

Berlin also figures prominently in the matter to which Hazeltine and its former executives pleaded guilty.

Colarusso and Furciniti hired Parkin for $2,000 a month in 1986 to help Hazeltine win a Navy contract for similar radar test gear, known as the UPM-150, that was potentially worth more than $150 million.

Parkin again turned to Lackner because of his access to Berlin, telling him that he would give him “a little green to do what we have to do,” according to the indictment.

Alleges Payments

The two consultants made periodic payments of between $500 and $2,000 to Berlin for inside information and his assistance in winning the Navy contract, the government charges.

While the indictment cited no direct evidence that Berlin received payments, a statement of facts submitted with the guilty pleas noted that from January, 1987, through June, 1988, Berlin wrote checks to himself averaging $1,400 per month, “indicating that he conducted many personal transactions in cash.”

“The records also show that he wrote no such checks during May, 1988"--a month when Lackner allegedly delivered two cash payments, the statement said.

Hilton set sentencing for April 28 for Savaides and March 17 for Colarusso and Furciniti. All three were released on personal recognizance. Those indicted Friday were expected to be arraigned Jan. 13.