‘It’s Still Business as Usual,’ Despite Defense Fraud Probe

A year ago this week, an obscure Alexandria, Va., defense consultant named William L. Parkin returned home from a shopping trip to find a platoon of FBI agents searching his house from attic to basement. The agents would not reveal what they were looking for but they left behind little sticky pieces of paper indicating where they had seized evidence.

Only later did Parkin learn that he had been swept up in the net of the massive Ill Wind investigation into corruption in the military procurement system. The search of Parkin’s house was one of more than three dozen conducted that day, from the offices of procurement officials in the Pentagon to the headquarters of major military suppliers in Connecticut, Missouri, Texas and California.

Today, Parkin is a broken man, recovering from a suicide attempt, waiting alone in his Alexandria home for space in a federal prison so he can begin serving a 26-month sentence for his March guilty plea to conspiracy, fraud and bribery charges.

Since the Ill Wind case exploded into public view on June 14, 1988, 14 men have pleaded guilty to or been convicted of crimes ranging from bribery of a public official to making illegal campaign contributions, and repercussions have been felt in Congress, the Pentagon and corporate boardrooms.

Still, those who know the Pentagon procurement system best say that little of substance has changed in the way America buys its military hardware.

The defense consulting business has gotten a bad name and a few Pentagon regulations have been revised. But weapons still cost too much, the system is still too complex and opportunities for graft and corruption are still rampant, experts say.

“Have we changed the way we do business? The answer is no,” said recently retired Maj. Stephen S. Beitler, a former high-level procurement specialist in the office of the undersecretary of defense for acquisition. “It’s a long process, and it doesn’t happen overnight. It occurs through systemic change, not through chipping away at the edges, and that’s what this investigation is--chipping away at the edges. It has been more publicity-intensive than change-intensive.”

Cites Need for Reform

Added Eugene Caffiaux, senior vice president at the Electronics Industries Assn., a trade group of major Pentagon suppliers: “This probe has given attention to a crying need for reform in the acquisition process. It’s had a deterrent effect but I haven’t seen anyone stepping forward to really reform the system. People are talking about it more now but the real effort has not begun.”

There has been plenty to talk about. In addition to the convictions of individuals:

--Two corporations have admitted guilt in the affair and agreed to pay multimillion-dollar fines and to surrender millions of dollars in illegal profits.

--Units of several top defense contractors have been suspended indefinitely from doing business with the government and some of the capital’s top free-lance defense consultants have been run out of business.

--Five Pentagon officials have been fired, suspended without pay or demoted.

--The late Rep. Bill Chappell Jr. (D-Fla.), who reportedly was investigated for his links to defense contractors, lost his 1988 race for reelection, and former Texas Sen. John Tower, who did defense consulting work, was denied confirmation as defense secretary, in part, because of the Ill Wind climate.

Vow More Indictments

Federal prosecutors declare themselves pleased with the progress on the case so far and promise more indictments and more convictions. The highest-ranking targets of the investigation, including former Assistant Navy Secretary Melvyn R. Paisley, have not been charged but prosecutors say that those who have been convicted are providing evidence against a large number of suspect firms and individuals.

The hopes for reform lie, in part, in legislation that is still pending in Congress. Industry and government officials say it is too early to tell what will come of it, and, if it is enacted, whether it will have a significant effect.

Parkin typified an embedded problem in the Pentagon procurement system. He was a former official of the Navy’s Joint Cruise Missile Office, responsible for buying millions of dollars worth of electronics for some of the military’s most sensitive projects.

He retired in 1983, taking with him through the revolving door a wealth of information on how the Pentagon buys weapons and a host of contacts in key bureaucratic positions. He marketed himself as a specialist in the procurement process and signed on with a number of firms seeking lucrative Pentagon business.

‘Inside Skinny’

Eventually he joined with a number of other consultants and conspired to funnel thousands of dollars in payoffs to Navy electronics engineer Stuart E. Berlin in exchange for what one of the consultants called “the inside skinny” on military purchasing decisions. Berlin later admitted taking bribes for more than 10 years and was sentenced to 26 months in prison.

The scheme resulted in Parkin’s indictment in January on charges of wire fraud and conspiracy to bribe a public official. He pleaded guilty in March, just days after unsuccessfully trying to kill himself with an overdose of prescription sleeping pills.

“Ninety-nine percent of my business was strictly legitimate and I saved people a lot of money. But I got in with some people and I’ve paid the price,” the white-haired, 65-year-old Parkin said in an interview this week. “Life isn’t worth living.”

In sentencing several of Parkin’s confederates in the bribery scheme last week, U.S. District Judge Richard L. Williams called Parkin “scum” and “a dog.” He marveled that Parkin and his ilk could command huge fees from Pentagon suppliers “for what amounts to absolutely zero.”

The federal judge called the Pentagon procurement process “an outrage” and said: “I can’t believe our government lets a system like this endure.”

Unfortunately, specialists say, it will endure. Reforms adopted as a result of Ill Wind have had only a marginal effect on the $150-billion-a-year Pentagon procurement process, they say.

Although the revolving door has been slowed since last summer by new federal regulations regarding post-government employment, it has not been nailed shut, as critics demand.

Rep. Barbara Boxer (D-Greenbrae) has introduced legislation barring the top 2,500 Defense Department officials from employment with any of the nation’s biggest defense contractors for two years after leaving the Pentagon.

She also is planning legislation to create an independent professional acquisition corps outside the Defense Department to limit the coziness between military contractors and Pentagon purchasing agents.

The corps, modeled on a system used in France and other European countries, would negotiate with contractors on behalf of the government but would not be “owned” by the military services. The acquisition unit would be designed to provide an attractive career path to specialists in engineering and procurement who presumably would be less tempted to sell their expertise after a few years to the highest bidder in private enterprise.

Sen. David Pryor (D-Ark.) has labored for years to restrict the use of consultants by the government and by firms doing business with federal agencies.

“I’ve been at it for 11 years and let me be the first to admit I’ve not made a dent,” Pryor said. “It’s still business as usual, notwithstanding Ill Wind. Even though there have been several indictments and a lot of fines paid, it doesn’t stop this big lumbering machine from going on down the road as usual. I just don’t see much change in the attitude.”

Inside the Pentagon, a few incremental changes have been adopted. Thirty-six firms that have been implicated in the probe were forced to sign a pledge that they would not use fraudulent means to win military contracts. Pentagon procurement officers were warned against accepting anything of value from contractor representatives. Consulting charges on invoices from contractors are receiving closer scrutiny. All new Pentagon contracts will contain a provision requiring the forfeiture of any ill-gotten profits.

But broader efforts to streamline the procurement system, improve competition and rationalize spending decisions were, if anything, slowed by the Ill Wind scandal, according to Robert B. Costello, who retired last month as undersecretary of defense for acquisition, the Pentagon’s top procurement officer.

“I think the significant reforms, to really alter how we do business, were perhaps delayed a bit because of all the attention and energy spent on Ill Wind. It made some of the reforms harder to put in place,” Costello said. The scandal “cast a shadow on everybody” and hurt the morale and credibility of those inside the department who were committed to reform.

Kathleen A. Buck, until January the Pentagon’s general counsel and now a private attorney in Washington, cautioned Congress against overreacting and depriving the government of the services of legitimate consultants.

“You have to be careful there because there are lots of consultants who have provided excellent services over the years, who, I hope, won’t be tainted by the actions of some people,” Buck said. “On the other hand, I think some good policy changes were made as a result of the investigation.”

The munitions makers and their supposed overseers in the Pentagon have never enjoyed great public esteem, and the Ill Wind scandal has done nothing to improve their reputation, said Larry J. Korb, a former assistant secretary of defense who is now with Washington’s Brookings Institution.