Man Receives 2-Year Sentence for Patriot Missile Overcharges : Fraud: His wife gets probation. There is no evidence that the parts involved were faulty, prosecutor says.

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

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

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

Zarachoff was owner and president of the company, which made one-inch-long temperature sensors for antimissile and antiaircraft Patriot missiles until the fraud was discovered in 1986.

The Patriot has become a household word during the Gulf War because it is the main defense of allied forces against Iraqi Scud missiles. Patriot antimissile installations are being used to protect cities and military bases in Saudi Arabia and Israel and have repeatedly shot down incoming Soviet-made Scuds.

In a statement released after 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 were defective.

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 count of criminal conspiracy.

Madison said the two defrauded the 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 mailbox 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 to the government.

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

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

After the fraud was uncovered, Temcom was barred from providing sensors to Raytheon.