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Pentagon Fraud Scandal Washes Up in San Diego : FBI Search at Cubic Leaves Firm, Community Jittery About What Is Coming

July 25, 1988|GREG JOHNSON | Times Staff Writer

SAN DIEGO — At one of San Diego's biggest defense firms, Cubic Corp., layoffs this spring aren't the only nagging worry. There's also the question of why the FBI spent six hours last month searching the office of Senior Vice President C. C. (Sam) Wellborn.

Even Cubic itself wants to know more. Last week, a federal magistrate in San Diego denied the company a copy of a sealed document in which investigators reveal their reasons for the June 14 search carried out as part of the unfolding Pentagon investigation.

Cubic's Defense Systems subsidiary is the only San Diego company that has been the target of a search warrant in the probe. A major figure in the Pentagon investigation is William M. Galvin, a Washington defense consultant who has done work for Cubic.

A handful of other local firms are also curious about the investigation because they were unsuccessful bidders on programs that are now under scrutiny.

The unfolding Pentagon procurement scandal has its focus primarily in the Washington area, where investigators are probing the role of defense consultants and Pentagon officials in what prosecutors portray as a far-reaching fraud and bribery scandal.

But the scandal has also reached into communities across the nation where the defense industry does business--in St. Louis, the home of McDonnell Douglas, in Los Angeles, where three major defense contractors were searched, and here in San Diego.

While no longer the sleepy town that it was in 1919 when the Naval Station on San Diego Bay was established, the Defense Department--and particularly the Navy--is still vital to the region. An estimated 22% of the county's estimated $42.1-billion economy during 1987 comes from the military and its retirees.

Not surprisingly, the scandal has also prompted considerable interest among the county's sizable community of retired and active military personnel, partly because much of what has become public so far involves the Navy Department and Navy contracts.

"The facetious first response is that you immediately wonder which of your friends in the consulting business will be on that list," acknowledged former Vice Adm. William St. George, who now practices law.

Earlier Scandal

Since few details are known about the Justice Department investigation, particularly as it might affect San Diego, people are "waiting for the second shoe to drop," said retired Rear Adm. Bruce Boland, a county government official who retired in 1987 as commander of San Diego's sprawling naval complex.

Procurement scandals, of course, are also not all that new to San Diego's military community, which vividly recalls the Navy's harsh response to a 1985 procurement scandal that rocked the Miramar Naval Air Station when it became known that the Navy had paid $630 each for a pair of ashtrays.

That scandal resulted in the formulation of new procurement regulations. And, "Two very fine Navy officers (in San Diego) both got ramrodded out of the service," Boland said. "I'll be interested to see the downstream fallout of this investigation."

Just what fallout there will be in San Diego is far from certain. But sailors and Marines at the largest naval complex outside the Soviet Bloc could feel repercussions if contracts tainted by the probe are frozen, rebid or rescinded, according to former Adm. Edward Briggs, who retired recently after serving as commander of the surface fleet in the Atlantic.

"I'm worried about the effect (the investigation) will have on our ability to design, procure and deploy weapons," Briggs said. "We may have already lost some combat subsystems."

For now, however, the investigation and its effects seem to be limited, at least in San Diego. But some other individuals and companies besides Cubic have been touched by the swirling controversy.

The FBI in December tapped the telephone of Donald Illeman, a local defense industry consultant since the mid-1970s. The wiretap was revealed in an affidavit made public recently in Dallas.

The FBI did not, however, explain why Illeman's telephone was tapped. Last month, the consultant would only say that he is "a friend" of one of the individuals whose name has surfaced in the investigation.

In court documents in San Diego concerning a 1982 divorce, Illeman's former wife said William Parkin and Thomas Muldoon had been guests in their San Diego home. The FBI on June 14 searched the offices of Parkin and Muldoon, two Washington-area defense consultants.

In those divorce records, Illeman identified himself as a former manager of contracts for General Dynamics Electronics. He also said he had worked as a consultant for various defense contractors, including Teledyne, General Dynamics, Ford Aerospace, Cubic and Itek.

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