Air Force Freezes Payments to Loral; Inside Bid Alleged
The Air Force on Tuesday froze payments to Loral Corp. on an electronics contract that federal investigators say was based on improperly obtained inside information.
A day earlier, the head of the General Accounting Office recommended that the Air Force cancel the Loral contract, potentially worth $2 billion over the next 10 years.
The GAO was acting on a complaint from Litton Industries Inc., Loral’s chief competitor for the work, which charged that New York-based Loral had obtained sensitive information about Litton’s bid from an Air Force official involved in the program.
Federal law enforcement officials allege--based on wiretap evidence--that the official, former Deputy Assistant Air Force Secretary Victor D. Cohen, was paid for the information by William M. Galvin, a high-powered defense industry consultant employed by Loral.
Case Fits Pattern
The case came to light in January as part of the sweeping “Ill Wind” investigation into corruption in the Pentagon procurement system. The case fits the pattern established in previous successful prosecutions, in which defense consultants were found to have bribed Pentagon officials for sensitive bidding information, which was then sold to companies seeking military business.
Loral won the lucrative contract for F-16 cockpit electronics gear in December, 1988, after underbidding Litton by $100 million, a Loral spokesman said.
“Loral strongly believes that the Air Force’s selection process for its Advanced Radar Warning Receiver was proper,” the company said in a statement. “The findings assumed by the GAO remain unproven allegations which Loral believes are untrue.
“A delay in the program would be costly to the Air Force and damaging to a critical defense requirement. Loral supports the Air Force in its efforts and hopes that the Air Force . . . will continue the program with Loral.”
Loral is the nation’s 32nd-largest Pentagon contractor, with sales to the military last year of $670 million.
Litton, the nation’s 13th-largest defense contractor, said it is “pleased” by the GAO recommendation and volunteered to work with the Air Force to “fulfill the requirement for production of these systems.” Litton is based in Beverly Hills.
Reviewing Recommendation
The Air Force said Tuesday that it is reviewing the GAO recommendation to determine whether it should reopen the contract to bids and punish Loral if it in fact won the original competition improperly. In the interim, an Air Force spokesman said, new funds for the program have been frozen and Loral will receive no additional payments.
William D. Nussbaum, the attorney for consultant Galvin, said his client “denies any wrongdoing. Mr. Galvin had no inappropriate contacts with anybody.”
Cohen’s lawyer, Julian Greenspun, said there is “no proof that Victor Cohen gave Galvin any sensitive information. That is merely an accusation or an assumption by an FBI agent who wants big headlines.”
The Air Force moved to fire Cohen after the case was made public, but Cohen challenged the dismissal. He has been reassigned away from contracting duties and is conducting an economic study for the Air Force, Greenspun said.
A federal law enforcement official said Loral, Galvin and Cohen remain under investigation in connection with this contract and other Pentagon business.
