San Diego Ship Repair Firm Faces 32 Counts

A federal grand jury Thursday indicted a San Diego-based ship repair company and several company officers on charges of violating environmental, tax, theft and campaign contribution laws.

The 32-count indictment charges David L. Bain, owner and chief executive officer of Pacific Ship Repair & Fabrication Inc., and nine others with conspiracy, embezzling $1.4 million from the company’s employee profit-sharing plan, theft of a $1-million overpayment by the Navy, various income tax violations and making illegal campaign contributions to candidates for federal office.

Pacific Ship Repair, formerly known as Arcwel Corp., was charged with violating the federal Clean Air Act in connection with the company’s removal of asbestos from the Navy aircraft carrier Ranger last winter.

The investigation took 20 months and involved the U.S. attorney’s office, FBI, Naval Investigative Service, the Internal Revenue Service, the San Diego Hazardous Waste Task Force and San Diego Air Pollution Control District.

“This was an extremely complex case,” said William Braniff, U.S. attorney for the Southern District of California. “The principals of (Pacific Ship Repair) ran the corporation in total disregard of the law. These charges make clear that we will hold corporations and their principals accountable for their action.”

Those charged are expected to surrender to authorities within a week for arraignment, officials said.

Bain, a former campaign treasurer for Mayor Maureen O’Connor, is charged with 17 counts of embezzlement, conspiracy, theft, filing false personal and corporate income tax returns and making illegal federal campaign contributions. None of the allegedly illegal contributions involved O’Connor’s campaign.

Bain could be sentenced to a maximum of 72 years in prison and a $3.6 million fine in the charges.

George S. Parker of El Cajon, the company’s former part owner and chief executive officer, is charged with 16 counts of embezzlement, conspiracy, theft and falsification of personal and corporate income tax returns. He could be sentenced to a maximum of 72 years in prison and $3.4 million in fines.

Kendall M. Squires, Pacific Ship Repair attorney, said Bain will resign Nov. 6 to prepare his legal defense and protect the “successful business operations of the company.” Squires refused further comment and said Bain and other company principals also would not comment.

Michael Pancer, Bain’s attorney, said the San Diego businessman “has broken no laws” and will be cleared of the charges in court. Pancer declined further comment, saying he had not seen the indictment.

According to the indictment, Bain, Parker and George T. Keen Jr. of Ranchita embezzled about $1.4 million from a Pacific Ship Repair profit-sharing plan to pay company creditors to avoid bankruptcy in 1986.

Bain also was charged with making a false application to Great Western Bank in Escondido for a $500,000 loan. Bain and Parker are also accused of converting a mistaken overpayment of $926,397 by the Navy to Pacific Ship Repair in 1987. They allegedly broke tax and other laws while trying to hide the embezzlement and the Navy money, the indictment said.

Bain and Parker also were charged with violating the federal Election Campaign Act by making campaign contributions that exceeded the legal cap, illegal contributions from corporations and from a government contractor and trying to hide the source of those contributions. They allegedly had company employees make individual political contributions, then reimbursed them with company funds.

Receiving the contributions were Rep. Les Aspin (D-Wis.), the national Democratic Senatorial Campaign Committee and San Diego attorney Robert K. Butterfield Jr., a Republican who lost his 1988 race for the 44th Congressional District seat to incumbent Democrat Jim Bates.

Aspin, Butterfield and the Democratic committee were not aware the contributions were illegal and were not named in the 50-page indictment, said Braniff.

Aspin, chairman of the House Armed Services Committee, released a statement saying Bain raised $28,000 for him at a 1988 fund-raiser and that the money was reported to the Federal Election Commission.

Butterfield said Bain, his wife and some business associates donated about $5,000 to his election campaign. He said he never met Bain and was aware of nothing improper in the donation.

Also named in the indictment were John E. Elledge of Lake City, Fla., Richard A. Keen of Lakeside, MDS Unlimited Inc. of San Diego, Bruce E. Williams of Santee, Robert W. Spann of San Diego, Max D. Smith of Poway and Edwin G. Speakman IV of San Diego.

According to the indictment, Pacific Ship Repair and one of its foremen, David Blalock, failed to take required safety precautions when asbestos insulation was removed from the Ranger in late 1989 and early 1990, causing an unknown amount of asbestos fibers to be released into the air where workers and sailor were unprotected.

Asbestos, banned in 1979 for most construction uses, can cause lung cancer and asbestosis, a fatal lung ailment.

Under terms of the contract, Pacific Ship Repair was required to comply with strict federal, state and local laws in removing and disposing the asbestos.

The renovation included the removal and replacement of 1,100 feet of piping covered with insulation, including more than 260 feet that was covered with asbestos. During the renovations, the Ranger was docked at Pier L at the North Island Naval Air Station.

Federal authorities also filed similar charges against the subcontractor on the job, California Marine Commercial Insulation Inc. and its president, Frank Chavez, alleging the company knowingly failed to ensure that workers took proper precautions as they removed the dry, crumbling asbestos.

Chavez, who has pleaded guilty and will be sentenced Nov. 20, is Bain’s father-in-law and also an employee of Pacific Ship Repair. CMCI could be fined a maximum of $25,000, and Chavez could be fined $12,500 and given six months in jail.

Pacific Ship Repair, a master ship repair company, employs 300 to 600 people and has had renovation contracts with the Navy and commercial ships for 20 years.

Dennis R. Shaw, the company’s vice president for government relations and marketing and a former deputy undersecretary of the Navy, will succeed Bain as Pacific Ship Repair’s chief executive officer.