Loral Corp. Admits to Guilt in Defense Contracts Scandal

The New York-based Loral Corp. pleaded guilty to three felony counts today for its attempts to influence improperly the award of two defense contracts.

The company admitted it paid defense consultant William M. Galvin $578,000 to obtain confidential bid information about an Air Force advanced radar warning contract and a Navy contract to build a blimp.

The company agreed to pay $5.77 million in fines, civil penalties and reimbursement for the cost of the investigation. A plea agreement between the Justice Department and Loral was approved by U.S. District Judge Claude Hilton.

Meanwhile, a former Sperry Corp. official admitted approving bribes to a former Navy procurement official, Garland L. Tomlin Jr.

James J. Thompson pleaded guilty to conspiracy and bribery and faces a possible 25-year sentence.

The Loral admission implicated two former Pentagon officials who have not been charged in the Justice Department’s continuing investigation of defense fraud, nicknamed Operation Ill Wind.

According to a statement of facts filed by prosecutors, former Air Force procurement official Victor D. Cohen gave Galvin inside information about the advanced radar warning system for F-16 aircraft.

Melvyn R. Paisley, then an assistant Navy secretary for research engineering and systems, provided Galvin with information about the Navy airship contract, according to the statement.

Paisley also made modifications in bid requirements that were favorable to the company’s bid, the statement said.

Loral had obtained the airship division from Goodyear Tire & Rubber Co. The scheme to improperly influence the airship contract began before the defense industry division had been obtained from Goodyear.

Galvin, who has not been charged, relayed information to Loral officials about both contracts that he had obtained from his Pentagon contacts, according to the statement. Loral admitted that it billed the government for the money it paid Galvin’s companies by submitting bogus vouchers for defense studies it falsely claimed Galvin was conducting.

In a statement, the company said it had suspended two individuals it did not identify and had disciplined two others.

As part of the deal, Loral will retain the radar warning contract but must bear a greater share of the cost overruns.

A 1992 procurement for about $70 million worth of radar warning equipment will now be placed for competitive bidding.

Hilton, meanwhile, scheduled Thompson’s sentencing for Feb. 16. The former Sperry official admitted that he approved payments to Tomlin after another Sperry official, Frank Lavelle, suggested the arrangement.

The bribery scheme was also known to Charles F. Gardner, a former vice president of Sperry and its successor, Unisys Corp. Gardner has pleaded guilty for his role in the Pentagon procurement scandal.

Tomlin, who has returned most of the money he received in bribes, received an 18-month sentence for his guilty plea.