Unisys Agrees to Pay $190-Million Defense Scandal Fine : Pentagon: Sources say the firm will plead guilty in the Ill Wind procurement probe and suffer the largest such fraud penalty ever.
Unisys Corp. has agreed to plead guilty to federal fraud and bribery charges arising from the Ill Wind defense procurement scandal and will pay $190 million in fines and forfeited profits, government and company officials said Thursday.
The Unisys settlement--which includes the largest defense fraud penalty ever--will be filed today in U.S. District Court in Alexandria, Va., officials said.
The Pennsylvania-based firm is expected to plead guilty to charges that it employed a variety of schemes to rig bids on lucrative defense contracts, create secret slush funds, hire corrupt consultants and funnel bribes to government officials.
The charges will be spelled out in an inch-thick statement of facts detailing a web of influence-buying and high-level corporate espionage designed to cheat competitors and defraud the government on a variety of Navy programs.
The settlement marks the culmination of a four-year investigation by the Justice Department and the Naval Investigative Service into bribery and corruption in Pentagon weapons-buying that has yielded criminal convictions of more than 50 individuals and corporations. Moreover, the government has collected more than $230 million in fines and penalties, in addition to the Unisys settlement.
The highest-ranking Pentagon official to be ensnared in the Ill Wind net, former assistant Secretary of the Navy Melvyn R. Paisley, pleaded guilty to bribery charges in June. Another senior Pentagon executive, former Air Force official Victor D. Cohen, pleaded guilty in August.
Unisys has been negotiating the plea agreement with government authorities for more than a year. Company spokesman J. Peter Hynes confirmed Thursday that the firm had reached final agreement with the government and would ratify the deal in federal court today.
Hynes said that the complicated structure of the plea arrangement “would not materially affect our operations.” Unisys has suffered serious financial problems over the last several years and is in the middle of a broad and painful restructuring effort designed to preserve the company’s core businesses in computers and electronics.
The company will not pay the $190 million in a lump-sum cash payment, Hynes said. Rather, he said, Unisys will pay a cash settlement over five years, forfeit profits on a current Pentagon radar contract and make contingency payments based on future asset sales and profits.
Hynes declined to reveal the relative amounts to come from each of the three payment sources but said that the company already has set aside reserves to pay the cash portion of the penalty.
More than 10 persons who worked for Unisys previously have pleaded guilty to federal charges in the Ill Wind case and agreed to cooperate with authorities. Among them are Charles F. Gardner, a former vice president of Sperry Corp., which merged with Burroughs Corp. in 1986 to form Unisys.
In a statement, the company said that “the abuses uncovered in the procurement investigation have long since been corrected and the people involved removed from the company. Gardner, the principal focus of the illegal and well-concealed activities that dated back to the late 1970s at a defense business unit of Sperry Corp, pleaded guilty to multiple counts in March, 1989. Unisys has filed suit against Gardner for defrauding the company.”
As part of the settlement, prosecutors and the Pentagon have agreed not to bar Unisys from receiving future defense contracts, as often occurs when a firm is convicted of fraud. Several Unisys divisions doing business with the military were temporarily suspended from government contracts in 1989 after admitting misconduct on defense contracts.
BACKGROUND
The Ill Wind investigation into defense procurement fraud became public in June, 1988, when federal agents served four dozen search warrants nationwide--in Pentagon offices, corporate suites and the homes and businesses of a number of defense consultants. The case began with a tip from a former Marine Corps official, who told authorities that several senior Pentagon officials were conspiring with corrupt consultants to rig bids on millions of dollars’ worth of weapons contracts. Building from thousands of hours of wiretapped conversations among the principals, prosecutors pressured low-ranking conspirators to plead guilty and inform on higher-ups.
