Navy Lifts Bidding Ban on Varian Subsidiary

The Navy has lifted its suspension order against a unit of Varian Associates, a Palo Alto electronics company implicated in the federal “Ill Wind” investigation of fraud in Pentagon purchasing, officials said Tuesday.

Under unusual settlement terms, the company agreed to pay the Navy’s as yet undetermined cost of investigating the Varian unit. Varian has also set aside $250,000 to cover future claims against the company arising from potential fraud in bidding on military contracts, a spokesman said.

The firm’s Dallas-based Continental Electronics subsidiary was suspended from all government business in July based on allegations in a federal search warrant that the company had hired a Washington consultant to illegally help it win a Navy electronics contract.

The company was the first firm suspended from government business as a result of the procurement investigation. Since then, a number of large and small defense contractors have been temporarily barred from bidding on federal contracts because of allegations arising from the probe.

‘Minimal Effect’

The Navy said that, with Varian’s acceptance of the settlement, the company has “demonstrated its fitness as a responsible government contractor.” It said Varian would not be subject to any further bidding sanctions by the Navy as a result of admissions of wrongdoing by the Continental Electronics subsidiary.

However, the company is still liable to criminal prosecution in the matter, a Navy official said.

In a statement, Varian said “the company has reviewed, updated, and reissued its written policies and practices governing good business conduct. Varian has also initiated expanded training and internal audit programs to help ensure full and continuing compliance with the reissued rules of conduct.”

Varian spokesman Gary Simpson said the six-month suspension order against the unit has had a minimal effect on the company, which produces electronics and computer systems for defense, communications, scientific, medical and industrial applications. Simpson said Varian Continental represents less than 5% of Varian Associates’ overall sales, which last year amounted to $1.2 billion.

According to the federal warrant in the Varian case, consultant Mark C. Saunders approached Continental Electronics executive Joe Bradley in September, 1987, with an offer to help steer a lucrative Navy electronics contract to the firm.

Offered Use of Contacts

Saunders, who had been fired by the Navy after being convicted of using inside Pentagon contract information to profit in the stock market, told Bradley that he could use his contacts inside the Navy to help Varian win Navy business.

FBI wiretaps disclosed that Bradley was receptive to the offer and agreed to maintain absolute secrecy about Saunders’ activities on behalf of the firm.

A Varian spokesman said Bradley left the company in August. Saunders’ role in steering business to Varian is under investigation by the federal task force conducting the “Ill Wind” inquiry.