Firm Pleads Guilty in Defense Fraud Case : Pentagon: Two former U.S. officials are further implicated in the contract scandal. The company will pay $5.8 million under a plea bargain agreement.
Loral Corp., one of the nation’s largest defense electronics firms, pleaded guilty Friday to fraud and conspiracy charges arising from the ongoing Ill Wind investigation into corruption in Pentagon procurement.
Loral, based in New York, admitted hiring a Washington defense consultant to illegally influence the awarding of contracts worth millions of dollars for an Air Force radar warning system and a Navy blimp.
The company, in a plea bargain accepted in U.S. District Court in Alexandria, Va., agreed to pay the government $5.8 million in fines and reimbursements. In addition, it will forfeit all profits on the fraudulently won contracts and will have to submit new bids for future work on the radar programs.
In a separate plea agreement Friday, former Sperry Corp. executive James J. Thompson pleaded guilty to two counts of bribery and conspiracy for his part in a scheme to pay a Navy procurement official $400,000 for inside information on a large Navy maintenance contract. He faces 20 years in prison and $30,000 in fines.
The pleas mark the 29th and 30th individuals or firms to plead guilty or be convicted in the Ill Wind case, which broke in June, 1988, when federal agents raided the homes and offices of dozens of Pentagon officials, defense consultants and military contractors.
The Loral case further implicates two high-ranking former Pentagon officials, former Deputy Assistant Air Force Secretary Victor D. Cohen and former Assistant Navy Secretary Melvyn R. Paisley.
Neither man has been charged in the case and both have consistently proclaimed their innocence. But Loral’s plea agreement with the government states that the firm paid defense consultant William M. Galvin $578,000 over a three-year period ending in 1988 to influence Cohen and Paisley to steer the Air Force and Navy contracts to Loral.
Both men have left the Pentagon. Paisley resigned in 1987 to become a business partner of Galvin. Cohen was fired by the Air Force after numerous allegations of official misconduct surfaced in the Ill Wind inquiry.
According to a statement of facts filed by prosecutors, Cohen gave Galvin inside information about the radar warning system for F-16 fighter jets. Prosecutors said that, in exchange for payments from Galvin, Cohen agreed to “misuse his public office in order to assist Loral . . . and personally benefit(ted) as the result . . . .”
Paisley, according to prosecutors, gave Galvin sensitive information on the airship contract and modified the bid requirements in a way that favored Galvin’s client, then a subsidiary of Goodyear Tire & Rubber Co. It was later acquired by Loral.
Galvin, who has not been charged, relayed to Loral executives information 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 by submitting phony invoices for reports Galvin purportedly wrote.
In a statement, Loral said that it had suspended two unnamed officers and had disciplined two others.
“This regrettable incident should not have occurred at Loral,” said Bernard L. Schwartz, the company’s chairman and chief executive. “We are satisfied that Loral has procedures and controls in place to provide the best protection from anything like this occurring again.”
Under terms of its plea bargain, Loral will keep the radar contract, but a later purchase of $70-million worth of additional radar warning equipment that had been guaranteed for Loral will be put up for competitive bidding.
