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S.D. County to Recover Losses in Fraud Case

June 18, 1986|JIM SCHACHTER | Times Staff Writer

Two corporations at the center of a scandal over San Diego County's telecommunications systems pleaded no contest Tuesday to federal fraud and racketeering charges. The plea was part of an agreement that reimburses the county for its losses and the costs of investigating the scheme.

Telink Inc., the now-inactive Anaheim firm that in 1982 won a $24.5-million contract to develop a microwave communications network for the county, and its parent company, Burnup & Sims Inc. of Plantation, Fla., agreed to pay $4.8 million to government entities to settle the criminal charges against them.

San Diego County also will keep $2.4 million in communications equipment installed by Telink before the Board of Supervisors tore up its contract with the firm early in 1983--amid allegations of payoffs, kickbacks and corruption.

At a press conference announcing the agreement, Dist. Atty. Edwin Miller described the cash settlement in the case--which has cast a shadow on county government for more than four years--as the largest ever obtained by a local prosecutor in a criminal investigation.

"Through the plea, the county is made whole for the most massive fraud against a governmental entity ever perpetrated in San Diego County history," Miller said.

Felony charges still are pending in U.S. District Court in San Diego against 11 individuals, including two former county officials, implicated in the joint federal-county investigation. Miller declined Tuesday to predict whether prosecutors might reach plea bargains with the defendants before their scheduled Oct. 28 trial.

Two other defendants have already pleaded guilty to charges in the case.

By pleading no contest, the companies did not acknowledge any guilt in schemes to defraud San Diego and Fresno counties but agreed not to assert their innocence of the allegations. Unlike a guilty plea, the no-contest arrangement gives defendants some protection from having the facts uncovered in the criminal investigation used against them in any civil litigation.

Defending his office's decision not to press for an admission of guilt, Miller said the multimillion-dollar settlement produced a far better financial result for the county than if prosecutors had obtained a series of convictions and relatively nominal criminal fines.

"If they'd gone to trial, the penalties they could have suffered would have been much less, so there is a punitive aspect," added Lantz Lewis, the deputy district attorney who negotiated the settlement over the past six months.

In conjunction with the plea bargain in the criminal case, the county agreed to dismiss its $177-million civil lawsuit against Telink and 17 other defendants.

"We have been in litigation on this matter for more than three years, and we have now reached what we feel is an equitable settlement," said Supervisor Brian Bilbray, waving a $500,000 check from Burnup & Sims at a separate press conference. "The complicated legal entanglements of this lawsuit have been resolved, and we are closing the books on this incident."

Financial considerations prompted Burnup & Sims to agree to the settlement, according to Richard Cutter, the general counsel for the media and telecommunications firm.

"It had become, quite honestly, no longer worth fighting," Cutter said in a telephone interview. "It was worth more to us to reach this very good settlement for both us and the county."

The unknown costs of the pending litigation had forced Burnup's accountants to issue a qualified opinion on the company's financial condition for several years, Cutter noted, making borrowing and other transactions more difficult.

The scandal had its roots in a plan proposed in 1980 by Abraham Stein, then the county's communications chief, to create an elaborate phone system that would link county offices by microwave transmissions and pay for itself in 7 to 10 years.

Unrelated allegations of misconduct forced Stein to resign in 1981. But hints of corruption continued to cloud the $24.5-million contract for the microwave system, which supervisors awarded to Telink in June, 1982.

Business leaders called for a county grand jury investigation of the contract, but the inquiry soon expanded into a joint probe by federal and county investigators and prosecutors.

An informer told investigators that Stein controlled the actions of H. Larry Gonzalez, who later was fired as director of the county's General Services Department and charged with Stein and 11 others in the federal indictment.

The indictment, issued in October, 1984, said Telink conspired with Telecommunications Design Corp., the consulting firm hired by the county to help it pick a contractor for the new phone system, to obtain the contract through bribes, kickbacks, falsification of documents and even supplying prostitutes for Gonzalez and others while the contract was being bid.

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