A subsidiary of San Diego-based Cubic Corp. and its former chief executive pleaded guilty Tuesday to conspiring to bribe a Pentagon official in an attempt to win Defense Department contracts.
Cubic, which pleaded guilty to three felony counts of conspiracy, theft of government property and filing false statements, agreed to pay $4.6 million in civil and criminal fines and penalties as part of a negotiated settlement entered in U.S. District Court in Alexandria, Va.
In a separate settlement, former Cubic Defense Systems President C.C. (Sam) Wellborn pleaded guilty to giving money to a Washington-based consultant who used the funds to obtain sensitive Defense Department documents from a top Pentagon procurement official. Wellborn, who resigned from Cubic in 1989, was the only Cubic employee charged in the Ill Wind investigation.
Wellborn, who could be sentenced to a maximum of 15 years in prison and a $500,000 fine, has agreed to cooperate with federal investigators in the continuing Ill Wind investigation, Assistant U.S. Atty. Joseph J. Aronica said Tuesday.
The guilty pleas ended the government’s investigation into Cubic’s role in the continuing Ill Wind investigation. The defense procurement investigation drew wide attention during the summer of 1988 when agents from the Naval Investigative Service and the FBI searched the offices of dozens of defense industry executives, consultants and government officials.
Cubic’s Defense Systems subsidiary was the fifth contractor to enter a guilty plea in the Ill Wind investigation, which has generated 42 convictions and recovered more than $40 million in fines and penalties.
Tuesday’s negotiated court settlement does not prohibit Cubic from seeking future Defense Department contracts, but Cubic now will be reviewed by the Defense Department, which regularly investigates companies that are found guilty of criminal activity.
That investigation could result in the suspension or permanent debarment of Cubic, according to Cubic Vice President William Stewart. However, Cubic executives are optimistic that the defense subsidiary, which has enlisted new management and expanded its ethics policy, will be cleared to seek contracts, Stewart said.
“The Justice Department has stated emphatically that there was no other subsidiary or division involved (in Ill Wind) and that there was no other officer, director or employee involved,” Stewart said. “No one else had any knowledge or involvement in this thing.”
Aronica said that, although the Defense Department has suspended some companies involved in the Ill Wind investigation, no firms have been disbarred. Executives convicted during the investigation have received sentences ranging from time spent in halfway houses to a 32-month federal prison sentence, Aronica said.
The negotiated settlements reached Tuesday by Cubic and Wellborn involved two key targets of the Ill Wind inquiry--Air Force procurement official Victor D. Cohen and former Washington-based consultant William Galvin.
Cohen has not been charged in the investigation, but Galvin earlier pleaded guilty to unrelated charges and is serving a 32-month prison sentence, Aronica said.
Wellborn and Galvin conspired to provide Cohen with “various things of value,” including gifts, travel, meals, payments to friends and associates and promises of future employment, according to Ill Wind investigators. In return, the court documents state, Cohen, an Air Force procurement officer, improperly assisted Cubic Defense Systems by turning over sensitive information to Galvin.
Galvin, court papers state, gave Wellborn falsified reports that Wellborn then used to justify $328,580 in payments made by Cubic. Cubic executives subsequently sought reimbursement for those payments from the Defense Department, according to the documents.
Federal investigators, however, have cleared Cubic executives of wrongdoing. The extensive examination found no evidence that other Cubic executives “were aware of the bribery agreement between Wellborn, Galvin and Cohen,” according to court papers.
Cubic failed to win one of the contracts that came under scrutiny during the Ill Wind investigation. Cubic won the other contract. The company has continued to win Defense Department contracts since the investigation became public. Cubic recently won a U.S. Army contract that, with options, is valued at $80 million.
Cubic’s stock closed up $.125 Tuesday, at $15.375, as 6,000 shares changed hands.