McDonnell Chairman Vows to Investigate Billing ‘Errors’

Acknowledging that “errors appear to have occurred,” McDonnell Douglas Chairman John McDonnell said Wednesday that the company would investigate whether the firm had billed the Pentagon for millions of dollars in advertising and entertainment charges, as alleged in a government audit.

In a statement, McDonnell said he was “concerned about these reports and committed to resolving this issue promptly.” He ordered a review of accounting procedures and vowed to investigate every charge raised in the audit, performed by the General Accounting Office.

In testimony Wednesday before the House Energy and Commerce Committee, Fred J. Newton, deputy director of the Defense Contract Audit Agency, said the agency discovered $10-million worth of improper billings at two McDonnell Douglas locations between 1986 and 1991.

For example, Newton said, the contractor charged the taxpayers $23,650 to produce 15,000 automobile windshield sunshades as part of an advertising promotion. The firm also submitted $3 million worth of photo lab expenses, partly for pictures taken at a company Halloween party and Christmas pizza party.

“It is absolutely unacceptable,” Newton said.

Meanwhile, the GAO said the firm billed the government $1.6 million for producing and mailing 100,000 copies of a quarterly videotape featuring John McDonnell that was shown to employees. Company officials were invited to testify at the hearing, but declined to do so.