Navy Suspends 3 Unisys Units From Contracts : 3 Sundstrand Executives Indicted in Separate Pentagon Corruption Case

The Navy on Thursday suspended three units of Unisys Corp. from receiving federal contracts in the latest action growing out of the “Ill Wind” investigation into corruption in Pentagon weapons procurement.

The suspension follows guilty pleas by four former Unisys executives and consultants to charges of bribing Navy officials and making illegal campaign contributions to several members of Congress. The Pentagon has routinely suspended firms named in court cases in the Ill Wind investigation.

In a separate action Thursday, federal prosecutors in Illinois announced the indictment of three executives of the Sundstrand Corp. for their role in a scheme to overcharge the Pentagon on weapons contracts and to bribe military officials.

In the Unisys case, the Navy said it was suspending the firm for “egregious” and repeated misconduct, including “expense account abuses, improper use of consultants for lobbying purposes, improper corporate campaign contributions and bribery of government officials.”

The suspension is open-ended and bars the three Unisys units from receiving contracts from any federal agency.

Admitted Bribery

The Navy, in a statement, said new instances of wrongdoing by the firm continue to surface and that the Unisys subsidiaries must be suspended “to protect the government’s interests.”

In the most recent court action, former Unisys executive Charles F. Gardner last week admitted his role in a multimillion-dollar scheme to bribe top Navy officials and funnel illegal campaign contributions to several key congressmen with influence over weapons-buying decisions.

Unisys, which was formed by the 1986 merger of Sperry Corp. and Burroughs Corp., is the nation’s 15th-largest defense contractor. All the alleged abuses took place at former Sperry units: Shipboard & Ground Systems, Great Neck, N.Y.; Computer Systems division, Eagan, Minn., and Communications Systems division, Salt Lake City.

A company spokesman said the three suspended units last year represented $1.9 billion of Unisys’ $2.4 billion in defense-related sales. Total corporate revenue in 1988 was $9.9 billion, he said.

Unisys said in a statement that its former Burroughs defense operations and its Federal Information Systems division, which sells computers to the government, are not affected by the Navy action.

A Unisys official said Thursday that an internal investigation and the guilty pleas revealed that a number of former executives and consultants “were not doing what they were paid to do.”

The spokesman, Peter Hynes, said Sperry funds intended for legitimate contract costs were being used for bribes, illegal lobbying and to enrich the employees and consultants themselves.

He said the suspension could have a serious effect on the company’s fortunes if it is protracted. “But we think it will be lifted quickly because we’ve been working with the Navy” to clean up the firm’s defense procurement practices, Hynes said.

Three Indicted

The Navy noted that Unisys had taken “vigorous and far-reaching actions” to punish and dismiss employees involved in misconduct and had been “extremely cooperative in the government’s investigation.”

Meanwhile, the U.S. Attorney’s Office in Chicago announced that three former employees of Sundstrand were indicted last week by a federal grand jury in Rockford, Ill. They are accused of conspiring to make millions of dollars in illegal profits for Sundstrand by defrauding the government and lying to federal investigators.

The three, including a former Sundstrand vice president, are the first to be named in the Justice Department’s continuing investigation of defense contract fraud at Sundstrand, based in Rockford. So far, the company has paid more than $200 million in fines, restitutions and contract concessions as a result of the inquiry.

The highest-ranking company official indicted is Joseph J. McCarthy, 53, who was Sundstrand’s vice president of finance and administration from June, 1982, until last January. Also named is Ray John Chapel Jr., 46, the company’s director of business planning until he left in April, 1986, and Ralph G. Hamann, 63, Sundstrand’s manager of government compliance programs until last April. McCarthy and Hamann live in Rockford and Chapel lives in Reston, Va.

According to the indictment, the three conspired to hide overcharges and rig contract bids by concealing true costs for more than five years beginning in 1980. They are also accused of scheming to hide material facts from Pentagon officials and lying to Defense Department contract compliance investigators.

Last October, Sundstrand agreed to pay the federal government $115 million after pleading guilty to overcharging on contracts, illegally supplying Defense Department workers and their wives with gifts and to illegally billing taxpayers for saunas, country club dues, dog kennel fees, snow plowing and servants for company executives.

Sundstrand makes mechanical and fluid pumps, engine starting systems and rudder controls for Navy and Air Force planes.

John Broder reported from Washington and Larry Green from Chicago.