Head of Teledyne Unit Transferred as Pentagon Contracting Probe Widens
Teledyne has removed the president of one of its largest defense contracting divisions amid a widening federal criminal investigation into overcharging on government contracts, The Times has learned.
The firm disclosed last month in a financial filing that the Federal Bureau of Investigation and the Defense Criminal Investigative Service searched the Teledyne Systems division in Northridge and “removed documents relating to contracts and pricing.”
The filing, which was the firm’s 10Q report to the Securities & Exchange Commission, also discloses that “several Teledyne Systems employees have received subpoenas to testify before a federal grand jury.”
The existence of a grand jury indicates that the federal probe has advanced beyond a preliminary stage. Sources in the defense industry, legal and investment communities have characterized the investigation as a major civil and criminal probe.
In its filing, Teledyne said it is attempting to determine through a preliminary internal investigation whether it faces potential liability and, if so, how much. The company also said it is “currently unable to determine whether there is likely to be any material effect on our financial condition or results of operation.”
By declining to state that the effect will not be material, Teledyne is effectively raising a warning flag indicating a large potential liability.
‘No Relationship’
Teledyne Systems President Harry Halamandaris was assigned to a new job on Teledyne’s corporate staff as assistant to an executive vice president, spokesman Berkley Baker acknowledged Monday. Allen Orbuch, group executive, was named acting president of the systems division, Baker said.
Baker declined to comment on whether Halamandaris’ transfer was related to the federal investigation. “He was transferred and as far as I know there is no relationship, but I would have to check that out.”
Information about Halamandaris’ transfer was rumored around the systems division, along with reports that a number of employees in the firm’s pricing department had been granted immunity and that potential mischarges are in the tens of millions of dollars.
The subject of the investigation has not been disclosed, but apparently it involves a broad range of defense contracts going back 10 years as well as the way Teledyne administratively handled charges to those contracts.
Corroborates Reports
The existence of the federal investigation was disclosed in a Times story in June. At that time, Teledyne had just announced a plan to examine the spinoff of its insurance and financial subsidiaries, a deal that would pare 20% of the firm’s annual revenue.
Teledyne’s disclosure that the Defense Criminal Investigative Service is involved in the probe corroborates earlier reports that a defense criminal task force in Redondo Beach is involved in the investigation.
The investigation reportedly was prompted by the filing of a civil case against Teledyne under the federal False Claims Act, which allows individuals to sue a contractor on behalf of the government. Such cases are sealed for an initial period of time.
The False Claims Act provides for a 10-year statute of limitations, which apparently explains why investigators are looking at records going back 10 years.
