Two O.C. Defense Firms Criticized for Expenses : Audit: GAO says Sparta, SRS Technologies billed U.S. for alcohol, trips to Mexico, Caribbean and Hawaii.
Two Orange County defense companies were criticized Thursday for billing the Pentagon hundreds of thousands of dollars in illegal or questionable expenses, including trips to exotic resorts for executives, excessive company car expenses, alcohol and unexplained consultant costs.
Sparta Inc. in Laguna Hills and SRS Technologies in Newport Beach were part of a group of eight defense contractors whose government billing practices were audited by the General Accounting Office, an investigative arm of Congress.
Although the report does not publicly break down specific questionable expenses company by company, a congressional source identified those incurred by the Orange County firms.
Among the questionable but legal expenses, the GAO found that Sparta sought government reimbursement for a $46,000 trip to Grand Cayman Island; $102,000 for a trip to Jamaica; $49,000 for a trip to Puerto Vallarta; and $135,000 for a trip to Hawaii. The trips were reportedly for annual management and business meetings.
On the trip to Jamaica for which the company sought $102,000 in reimbursements, according to the GAO, the company sent 151 employees to Montego Bay to attend its annual stockholders meeting. The employees brought 112 spouses or guests, the report said. The report doesn’t say how much of the trip or which expenses were billed to the government.
The trip was “intended to promote a corporate cohesiveness via both social and business interaction,” the GAO report said. The company reportedly contended that the costs of meetings in resort areas are a form of incentive compensation.
The GAO report said: “While we do not argue with the need to have legitimate business meetings, when the business trip takes on the character of a vacation, such as in the above instances, we question whether the government should pay for contractor employees to attend business meetings at resort locations.”
The GAO report did not specify whether the Pentagon had requested the return of any of the questioned expenses.
Sparta is also being questioned about billing the Pentagon for $2,300 in meals for spouses; $27,500 for personal use of a company car; $1,400 for alcoholic beverages; and $102,000 in inadequately documented consultant fees, according a congressional source familiar with the government audit.
Officials at Sparta and SRS Technologies declined to comment Thursday evening about the report or to provide explanations at a congressional hearing held Thursday in Washington to discuss the findings.
Even after Sparta was notified in 1992 of an investigation by congressional investigators, GAO analyst David E. Cooper told the committee Thursday, company officials billed the government for $229,000 for a trip to Hawaii.
SRS Technologies is also being questioned about the legality of billing the government for $10,000 for the personal use of a company car; $1,400 for alcoholic beverages; $37,000 in consultant costs that were not adequately documented; and $14,700 to cover the company’s legal costs in a lawsuit against the government.
SRS Technologies also allegedly billed $44,000 in costs for a trip that 40 employees and one consultant to the company took to the Elbow Beach Hotel in Bermuda. The GAO said it considered this cost questionable but not forbidden in regulations.
“No, this is not Donald Trump’s Visa bill,” said Sen. Jim Sasser, D-Tenn., chairman of the Senate Budget Committee, in remarks prepared for the hearing. “It’s the tab the American taxpayers are picking up for what defense contractors euphemistically call ‘overhead.’ ”
Sparta is one of the most secretive defense contractors in Orange County. Sparta President Wayne Winton once told a reporter that any employee who talks to the press about the company is fined. On occasion, however, the company talks to the media regarding its role in various government contracts.
Sparta is a key contractor in various contracts related to ballistic missile defense, known in the past as Star Wars, as well as other classified engineering projects. The company has grown to 640 employees and $79.6 million last year, according to Dun & Bradstreet.
SRS Technologies has 370 employees and sales last year estimated at $30 million, according to Dun & Bradstreet, which gathers market research data. Most of the employees are spread out in offices around the country, with only 28 in Newport Beach.
SRS Technologies specializes in testing and evaluating weapons systems. The company tested the Patriot missile defense system that was used during the Persian Gulf War against Iraqi Scud missile attacks. It has also participated in Star Wars ballistic missile defense research.
Elsa Boggs, assistant to President Mohindar S. Sandhu at SRS Technologies, said the president was traveling Thursday and had no immediate comment. Patty Smith, an assistant to Sparta’s Winton, said he, too, was not available.
Two GAO audits turned up a total of $4.9 million in costs that were questionable or illegal. That amount was in addition to $4.4 million in charges that the Pentagon’s own contract watchdog agency had rejected.
The first study of six small contractors, including SRS Technologies and Sparta, found $2 million in illegal or questionable expenses in addition to $1 million rooted out by Pentagon contract auditors.
The other companies are Foster-Miller Inc. in Waltham, Mass.; Sippican Inc. in Marion, Mass.; Electromagnetic Sciences Inc. in Norcross, Ga.; and MA-COM Inc. in Wakefield, Mass.
The second GAO study examined two large contractors. Here, auditors identified $2.9 million in illegal or questionable charges in addition to $3.4 million uncovered earlier by the Pentagon. The two larger companies were E-Systems Inc. of Dallas and McDonnell Douglas Corp. of St. Louis.
Sparta Inc. at a Glance
* Founded: 1979
* Headquarters: Laguna Hills
* President: Wayne Winton
* Employees: 640
* In Orange County: 42
* Business: Engineering services contractor involved in ballistic missile (“Star Wars”) and other defense engineering projects
* 1993 sales: $80 million
* Alleged illegal billings: $2,300 in meals for spouses; $27,500 for personal use of company car; $1,400 for alcoholic beverages; $102,000 in inadequately documented consultant fees
* Questionable charges: $46,000 for trip to Grand Cayman Island; $102,000 to send 151 employees, accompanied by 112 spouses or guests, to annual meeting in Jamaica; $49,000 for trip to Mexico; $135,000 and $229,000 for trips to Hawaii
Sources: Dun & Bradstreet, U.S. Congress; Researched by JANICE L. JONES / Los Angeles Times
SRS Technologies at a Glance
* Founded: 1970
* Headquarters: Newport Beach
* Chairman: Mohindar S. Sandhu
* Employees: 370
* In Orange County: 28
* Business: Computer integrated systems design and systems engineering
* 1993 sales: $30.2 million
* Alleged illegal billings: $10,000 for personal use of company car; $1,400 in alcoholic beverages; $37,000 in inadequately documented consultant costs; $14,700 in legal costs in a lawsuit against the government
* Questionable charges: $44,000 to send 40 employees and one consultant to Bermuda
Sources: Dun & Bradstreet, U.S. Congress; Researched by JANICE L. JONES / Los Angeles Times
