Rockwell Faces Fine of $1 Million Plus

Federal prosecutors said Thursday they will seek a fine “well in excess” of $1 million against Rockwell International Corp., which entered a conditional guilty plea to two felony charges of defrauding the government on a contract for a global positioning satellite system.

Bette Bardeen, assistant general counsel for Rockwell, entered the plea based on evidence that two mid-level managers at the firm’s Seal Beach satellite systems division double billed the Air Force on a contract for the NAVSTAR system and then attempted to cover up the false billing from government auditors.

Though Rockwell has consistently maintained it was unaware of the employees’ activities and alerted the government when it found out, federal prosecutors said Wednesday there is evidence that higher-level officials knew of the cover-up.

“The two employees named in the indictment were both managerial employees who acted with the intent to benefit the company when they participated in the double-billing scheme, and there is indication from our evidence that they did it with corporate knowledge and approval,” said Assistant U.S. Atty. Stephen A. Mansfield, one of the prosecutors.

Assistant U.S. Atty. George Newhouse, the co-prosecutor, said there was evidence that “corporate management” at Rockwell was aware of the cover-up, “and if they didn’t direct it, they at least countenanced it, allowed it to occur.”

Rockwell lawyers strongly denied that any higher-level officials were aware of the activities of Donald H. Carter, 60, former material division director at the satellite division, and Robert Zavodnick, who managed major subcontracts.

“We vigorously deny that, and never admit that, and that’s not true. What else can we say?” said Jim Neal, Rockwell’s outside counsel in the case.

Through the conditional guilty plea, Rockwell officials have reserved the right to appeal on their contention that they never should have been indicted because they provided the information about the double-billing scheme to the government of their own accord under the Department of Defense’s Voluntary Disclosure Program.

“The basis of the appeal is our position that in this case, two employees did wrong,” Neal said. “We investigated the conduct, we informed the government, we fired the employees, we offered to reimburse the Air Force, we turned over our file to the government, and the government turned around and indicted us, as well as the two employees.”

But U.S. Atty. Robert Bonner said the government’s own investigation was launched 10 months before Rockwell made any disclosures.

U.S. District Judge Consuelo Marshall set sentencing for Feb. 24. Rockwell faces a maximum fine of $500,000 on its guilty plea to one count of conspiracy to defraud the United States and an unlimited fine on a separate count of criminal contempt stemming from violations of a 1982 court injunction in an earlier mischarging case.

Bonner said he will seek a fine of more than $1 million “ . . . to get the attention of Rockwell and other defense contractors that fraud and cheating on government contracts will not be tolerated.”