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Rockwell, 2 Former Managers Accused of Bilking AF on Repairs

January 27, 1988|KIM MURPHY | Times Staff Writer

Rockwell International Corp. and two of its former managers were indicted Tuesday on charges of double-billing the Air Force by nearly $450,000 on contracts for a sophisticated satellite navigational system.

The 25-count Los Angeles federal grand jury indictment accuses the giant aerospace firm of obtaining secret reimbursement for unexpected repair costs on the $1.2-billion NAVSTAR global positioning project from a subcontractor, and then billing the U.S. government for the same costs and misleading government auditors looking into discrepancies in the billings.

Named in the indictment are Donald Carter, 59, former material division director at Rockwell's Satellite Systems Division in Downey and Seal Beach, and Robert Zavodnick, 46, former manager of major subcontracts for the division.

Contempt Is Charged

The indictment also seeks to have the company held in criminal contempt for violating a 1982 injunction prohibiting the firm from submitting false claims to the government, an order issued in response to a government suit accusing the company of fraudulently shifting costs to the space shuttle program.

"What is particularly egregious and disturbing about this case is that, according to the indictment returned today, Rockwell managers launched another scheme to chisel and defraud the government before the ink was dry on the injunctive order," U.S. Atty. Robert C. Bonner said in a prepared statement.

Assistant U.S. Atty. Janet Goldstein, who presented the case to the grand jury, said the alleged fraudulent activities began nine days after a federal judge issued the 1982 injunction.

In a harshly worded response, Rockwell officials denied that the company had done anything illegal and called the U.S. attorney's decision to seek a criminal indictment "an irresponsible and unwarranted abuse of prosecutorial discretion."

Charles H. Harff, senior vice president and general counsel for the company, said the case is based on information that Rockwell voluntarily provided to the government nearly 18 months ago.

Adjustment Offered

As a result of extensive internal investigation, he said, the company in the fall of 1986 offered the Air Force a contract adjustment and instituted "appropriate management actions."

Zavodnick, a Fountain Valley resident, was fired in October, 1986. Carter, of Downey, was removed from management status in the fall of 1986 and was placed on suspension Tuesday.

"The company has vigorously supported the government's voluntary disclosure policy, under which contractors have been led to believe that criminal processes are not appropriate for resolving government contract irregularities," Harff said. "Since Rockwell believes that it has fulfilled all of the requirements of the voluntary disclosure program, this indictment calls into question the government's commitment to its own policy and may well have a chilling effect on the self-governance process."

But Goldstein denied that Rockwell had made any voluntary disclosures about the contract discrepancies.

"On the contrary, rather than reveal their wrongdoing, Rockwell took affirmative steps to hide and conceal its crimes from the government and went as far as misleading and lying to the government when they (investigators) were trying to detect what had happened," she said in an interview.

Tuesday's indictment is the latest of several recent setbacks for Rockwell.

The company pleaded guilty in 1985 to charges that it submitted false employee time cards and overcharged the Air Force on a spare parts contract. Under a plea agreement, Rockwell agreed to pay $500,000 to the government and put $1 million toward installation of a computerized time-keeping system.

Last December, Rockwell's Downey-based space station group was unsuccessful in its attempt to win a $1.9-billion contract to build a major portion of America's first permanent space station. The contract was awarded to McDonnell Douglas Astronautics Co. in Huntington Beach. But Rockwell's Rocketdyne division in Canoga Park was awarded a $1.6-billion contract to build another section of the space station.

Last week, Rockwell lost out to Martin Marietta for a $508-million contract to build a national test bed simulation facility for the Strategic Defense Initiative.

The indictment focuses on two contracts Rockwell signed with the Air Force for development of the NAVSTAR program, capable of providing precise location information to ground troops, planes and ships by way of satellite-based signals.

Satellite Manufacturing

The development contract, signed in November, 1979, called for Rockwell to manufacture four experimental satellites. Costs that Rockwell incurred above a certain target level were to be shared with the government, with the Air Force picking up 65 cents of every dollar spent, up to a maximum ceiling price.

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