Fraud Figure Confesses Paying Bribe to Paisley : Guilty Plea Implicating Former Assistant Navy Secretary Seen as Breakthrough in Defense Probe

In a major breakthrough in the Pentagon fraud case, a former vice president of the Unisys Corp. pleaded guilty Thursday to bribing then-high-ranking Navy official Melvyn R. Paisley to win multimillion-dollar Defense Department contracts.

The executive, Charles F. Gardner, admitted that he had directed an associate in 1986 to use company funds to buy Paisley’s Sun Valley, Ida., condominium at an inflated price in return for preferential treatment on Navy and Marine Corps business.

A guilty plea entered by the Gardner associate, James G. Neal, a Unisys consultant, implicated a previously unnamed sixth Pentagon official in wrongdoing. The official is retired Navy engineer Garland Tomlin Jr. When serving in the Pentagon, according to Neal’s plea, Tomlin received $400,000 in bribes directed by Gardner.

The new pleas provide prosecutors with their strongest evidence to date implicating Paisley in the massive fraud case. Paisley, a former assistant secretary of the Navy who later became a successful defense industry consultant, is the highest-ranking target of the 2 1/2-year investigation. His lawyer strongly denied any wrongdoing by Paisley.

Gardner’s plea agreement, which included a pledge to cooperate with the government, gives prosecutors a potential star witness to testify against other defendants when cases produced by the extensive investigation come to trial.

“These are significant developments,” said U.S. Attorney Henry E. Hudson, who has been directing the investigation from his office in Alexandria, Va. “The cooperation we get . . . from individuals will advance the case substantially.”

However, the government’s willingness to strike a plea bargain with Gardner shocked some people close to the inquiry. “I can’t believe it,” one defense lawyer said. “This sounds like a desperation move.”

As a government target, Gardner, a highly placed corporate officer associated with many of the figures under investigation, was believed to rank in priority only behind Paisley and influential consultant William M. Galvin.

However, Thursday’s pleas also implicate Galvin in alleged bribery, saying that he advised Gardner to offer Paisley the inflated condominium price.

Under the agreement entered in federal court in Alexandria, Gardner pleaded guilty to one count of bribery of a public official, one count of conspiracy to commit bribery and one count of tax fraud. He faces a maximum penalty of 18 years and a $750,000 fine.

Sentencing was postponed until July, apparently to allow him to assist the government in the investigation.

Lawyers for Galvin and the Unisys Corp., as well as Paisley, denied that their clients were guilty of wrongdoing.

Denial by Paisley

“Mr. Paisley unequivocably rejects the contention that he was bribed by Charles Gardner or anyone else while at the Navy,” his lawyer, E. Lawrence Barcella Jr., said.

“Mr. Paisley had no knowledge that the sale of his condominium was anything other than a completely legitimate, arms-length transaction” at fair market price.

William Nussbaum, an attorney for Galvin, said, “Any allegation that Mr. Galvin bribed a government official or participated in a conspiracy to bribe a government official is absolutely false.”

A spokesman for Unisys said that the company had been unaware of Gardner’s criminal activities. The spokesman noted that those activities had begun when Gardner worked for Sperry Corp., which was acquired by Burroughs Corp. to form Unisys in November, 1986.

Gardner was forced by the company early last year to retire as a vice president and general manager of its Fire Control and Surveillance Division in Great Neck, N. Y.

‘Disguised’ Payoffs

The payoffs were “disguised by a small group of former Sperry employees and consultants . . . “ spokesman Peter Hynes said. “Gardner’s crimes were rooted in premerger practices that the new company helped find and eradicate.”

All of Gardner’s Sperry superiors have left Unisys since the merger, and 38 former Sperry employees have been dismissed or otherwise disciplined, Hynes said.

In addition to his admission that he had bribed Paisley, Gardner admitted Thursday that he used company money to establish a slush fund for campaign contributions to Rep. Roy Dyson (D-Md.), former Rep. Bill Chappell Jr. (D-Fla.) and others with influence over the defense procurement process.

His admission, in which he said he had directed Unisys subordinates and defense consultants hired by the firm to make the contributions, confirmed an account contained in a guilty plea entered in January by former Unisys executive Robert D. Barrett and former consultant Joseph E. Hill.

Abbe Lowell, a lawyer who represents both Dyson and Chappell, reiterated that the congressmen did not know the money was tainted. The two, and other congressmen reported to have received illegal campaign funds, have pledged to return them.

Faces Up to 15 Years

Neal, 63, who said he paid Paisley $149,000 for a condominium that was worth only $100,000, pleaded guilty to one count of conspiracy to commit bribery, one count of conspiracy to defraud the government and one count of tax evasion. He faces a maximum penalty of 15 years and a $750,000 fine.

Also pleading guilty was Galvin’s stepson, Kenneth F. Brooke, 40, who had worked for Galvin as an accountant. Brooke promised to testify against his stepfather and pleaded guilty to a single count of tax evasion. He faces a maximum penalty of five years and a $250,000 fine.

The pleas indicated that Gardner, while presiding over Unisys’ Great Neck division, supervised a network of associates that paid off Pentagon officials and contributed illegally to congressional campaigns in an effort to obtain further Defense Department business for Unisys.

The net effect, Gardner admitted in the court documents, was that many of Pentagon contracts at his division “were obtained or maintained through the use of bribes and illegal campaign contributions.”

According to an account that both Gardner and Neal swore to be true Thursday, the two bribed Paisley in August, 1986, with the condo purchase and sold the unit the next year for only $100,000. From 1981 to 1987, Paisley oversaw contracts awards for the Navy as assistant secretary.

In return, they said they sought Paisley’s help in steering to Unisys multibillion-dollar contracts as the Navy’s second source for production of the Aegis shipboard defense system and a multimillion-dollar contract to produce the Marine Air Traffic Control and Landing System.

Both contracts ultimately were awarded to Unisys. The Times reported last summer that Paisley in June, 1986, abruptly revised the bidding rules for the Aegis contract in a way that favored Unisys.

Thursday’s admissions disclosed that Gardner and Neal took elaborate precautions to disguise the source of the payment to Paisley, which they said they made at the recommendation of Galvin, whose close ties to Paisley were well-known in the defense community.

Under instructions from Gardner, the documents show, Neal deposited more than $150,000 in Unisys money into an account on Britain’s Isle of Man, which has secretive banking laws.

He then transferred those funds to his own Bahamian-based company, Surrey Investments, and finally passed that money through a third firm, Pathway Investments, to buy the Idaho condominium.

Neal said he had bribed the other Pentagon official, former Naval Electronics Systems engineer Tomlin, after Tomlin told Gardner that he would use his influence to help Gardner’s company obtain an unspecified multimillion-dollar Navy contract in return for a $500,000 payment.

Neal said that, at Gardner’s direction, he had transferred 18 separate payments totaling $400,000 to Longwood International, a Bahamian company owned by Tomlin. It could not be learned to whom the contract ultimately was awarded.

Resigned From Navy

A Navy spokesman said that Tomlin, a top-ranking civil servant, resigned from the Navy in October, 1985. Neither Tomlin nor his attorney could be reached for comment.

Gardner also profited enormously from the transfer of the Unisys funds. According to the pleas, a total of $1.7 million paid to Neal under his consulting contracts with Unisys ultimately was transferred to AVC Associates, a company Gardner had established without the knowledge of his superiors.

The Unisys spokesman said the company planned to take legal action against Gardner to recover the funds.