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Hughes Admits It Made Mischarge, Says It Will Fire 4

October 30, 1986

Hughes Aircraft took the unusual step Wednesday of publicly announcing that it has notified the government it has discovered a case of mischarging of labor costs on government contracts.

In connection with the mischarging, Hughes said it has voluntarily paid $170,000 to the Defense Department and that it plans to fire four mid-level executives next month at the company's Electro-Optical and Data Systems Group in El Segundo.

The rare move came after an internal company investigation disclosed that labor costs for engineering and fabricating a new device for field testing Hughes-built equipment for the M-1 tank were incorrectly charged to certain M-1 contracts that did not provide for the test unit.

The Hughes announcement marks one of the first times that the publicity-shy defense industry has voluntarily disclosed such financial misconduct.

"This is the first time this sort of thing has happened at Hughes," Ray Silvius, the company's director of corporate public relations, said. "But we wanted to be on record as indicating that this type of action will not be tolerated at our company."

The mischarges involved an infrared imaging device that enables tank gunners to see targets in the dark. The costs were incurred between September, 1982, and February, 1985, and the $170,000 paid by Hughes represents the amount that the government had been mischarged.

A Hughes spokesman said that although the four executives responsible for the mischarging did not personally benefit monetarily from their actions, their conduct was not inadvertent.

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