UTC Pleads Guilty to Fraud in Defense Scam

United Technologies Corp. pleaded guilty to fraud and conspiracy Friday in connection with the “Ill Wind” Pentagon contracting scandal and agreed to pay $6 million in fines and penalties.

The felony charges involved obtaining sensitive and confidential bid information on a radar control system for the Marine Corps and price data on engines for the Navy’s F-404 jet. The information gave United Technologies unfair advantages in seeking military contracts.

The guilty plea was the 57th conviction related to the Ill Wind probe of corruption in defense contracting. United Technologies agreed to pay $2 million in fines on the criminal counts, $2.5 million in civil claims and $1.5 million worth of expenses amassed in investigating and prosecuting the case.

“We’re pleased with the resolution of the matter,” said Joseph J. Aronica, lead prosecutor for the Ill Wind probe.

United Technologies, based in Hartford, Conn., pleaded guilty to conspiring to defraud the government, to the conversion of sensitive information and to wire fraud. The plea agreement settling the case was accepted by U.S. District Court Judge Claude M. Hilton in Alexandria, Va.

In the F-404 case, the company’s Pratt & Whitney division was successful in winning a contract in competition against General Electric.

Navy research chief Melvyn Paisley obtained sensitive price information on the engine before leaving the Pentagon to become a consultant. William M. Galvin, a consultant working for United, arranged for Pratt & Whitney to get the confidential information from Paisley.

“Our employees did not know that the material was stolen, but by accepting it, we were guilty, in simple terms, of denying the government its right to control the release of its information,” United Technologies Chairman Robert F. Daniell said Friday in a letter to employees.

The government acknowledged in the plea agreement that there was “no direct evidence any employee of United Technologies knew that the consultant ‘stole’ information from the Navy” and there was “no evidence that any member of the board of directors of UTC was aware that UTC employees possessed the F-404 pricing information.”

Paisley pleaded guilty in June, 1991, to accepting bribes to help two other contractors win government business.

United’s plea agreement also settles charges against one of its subsidiaries, Norden Systems Inc., which improperly obtained the Navy’s confidential ranking of firms competing to produce a radar system called ATACC.

United Technologies admitted that Norden officials conspired to get the information through consultant Thomas Muldoon, who obtained it from another consultant, Mark S. Saunders. Saunders received it from George S. Stone, a Navy procurement official.

Stone and Muldoon have pleaded guilty to conspiracy, and Saunders was convicted of conspiracy, according to the Justice Department.

Daniell said his firm “is glad to see this investigation closed after some four years, and we are determined to do everything we can to prevent any recurrence.”

In his letter, Daniell exhorted employees to behave properly. “The need to win business, to compete, is no excuse for unethical, or even questionable, behavior,” he wrote. “Don’t ignore your instincts. Understand and abide by our own code of ethics and all government contract compliance regulations.”

The Navy will decide whether to penalize United Technologies by denying it contracts, prosecutor Aronica said.