Patriot Missile Parts Maker Gets 2 Years in Fraud Case : Courts: The former owner of a Burbank firm charged $193 each for inch-long temperature sensors later purchased elsewhere for $58.

The former owner of a Burbank firm that made components for the Patriot missile system was sentenced to two years in prison Monday for fraudulently overbilling the government $540,000 for the parts.

Michael Martin Zarachoff, 45, of Northridge was also ordered by U.S. District Court Judge Ronald S. W. Lew to serve five years’ probation and pay back taxes, interest and penalty on the money that the government overpaid his firm.

Nanci Plath, 42, the company’s comptroller who is married to Zarachoff, was sentenced by Lew to five years’ probation and ordered to pay a $10,000 fine for helping Zarachoff with the fraud.

Zarachoff was owner and president of Temcom Inc., which made inch-long temperature sensors for anti-missile and anti-aircraft Patriot missiles until the fraud was discovered in 1986.

The Patriot has become a household word this month since being successfully used as the allied forces’ main defensive measure against Iraqi Scud missiles in the Gulf War.

Patriot anti-missile installations are being used to protect cities and military bases in Saudi Arabia and Israel, and have repeatedly shot down incoming Scud missiles in the war.

In a statement released after the sentencing, U.S. Atty. Lourdes G. Baird said, “Recent events have underscored the importance of defense systems such as the Patriot missiles. The integrity of our national security and the safety of our military personnel ultimately depend upon the defense contracting system, and fraud can’t be allowed to infect that system.”

Assistant U.S. Atty. Steven G. Madison said there was no evidence that the 3,000 sensors Temcom made for Patriot missiles were defective. He said it was unknown if the Temcom sensors were on missiles now being used in the Gulf War.

Zarachoff pleaded guilty last month to conspiracy, making a false statement to the government and tax evasion. He could have received a sentence of up to 15 years in prison. Before being sentenced, he told Lew, “I truly am sorry.”

Plath pleaded guilty to one charge of criminal conspiracy.

Madison said the pair defrauded the federal government between 1983 and 1986 by using a shell company called R-Tube to bill Temcom for goods and services it never provided.

R-Tube was no more than a rented mail box and a bank account belonging to Robert Martin, an alias used by Zarachoff, the prosecutor said.

Zarachoff and Plath used the money collected on the R-Tube bills for personal expenses such as mortgage payments, college tuition for children and car payments, Madison said. The bogus costs were passed on to Raytheon, makers of the Patriot missile, and then ultimately to the government.

Auditors at Raytheon first discovered the fraud which was then investigated by the Defense Criminal Investigative Service.

Raytheon paid Temcom about $193 each for the sensors, of which $92 went to R-Tube and was “clearly fraudulent,” Madison said. After the fraud was exposed, Raytheon purchased the sensors from another subcontractor for about $58 apiece, he added.

After the fraud was uncovered, Temcom was barred from providing sensors to Raytheon. Madison said the company has since been sold to Plath’s mother and has a new name. He said Zarachoff and Plath are still employed there.