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Did Nothing Questionable, Sparta Insists : Investigation: The Laguna Hills defense contractor defends its billing practices as consistent with government policy.

March 05, 1994|DEAN TAKAHASHI | TIMES STAFF WRITER

LAGUNA HILLS — Orange County defense contractor Sparta Inc. Friday defended its practice of seeking government reimbursement for sending key employees to yearly company meetings in resorts, saying its actions were consistent with government policy.

Sparta, an engineering services company, said in a press release that the only reason the costs were questioned during congressional hearings earlier this week was that the meetings were in places such as Mexico, Hawaii and the Caribbean.

The General Accounting Office, the investigative arm of Congress, has criticized Sparta and five other companies, saying they billed the government for questionable overhead costs. The GAO also blames Pentagon contract officers for permitting such costs.

Sparta said the Pentagon and GAO do not question its need for annual gatherings of key employees "to review operating policy and technology progress." The issue, Sparta said, is the extra cost of having the meetings at resorts. Sparta contends such sites add only $200 per employee--a figure the company said it considers "incentive compensation." The Laguna Hills company said it is "dismayed by the suggestion of improper overhead charges" billed to the Pentagon.

Sparta's statement says the company had consulted with the Pentagon before at least one of such meetings and had reached agreement on the terms for being reimbursed.

After the GAO raised concerns about trips conducted in 1988 and 1989, Sparta said, the company immediately refunded $17,000 to the government for costs "questioned by the GAO to be expressly unallowable."

The GAO released the report this week. It criticizes six small defense contractors, Sparta and SRS Technologies in Newport Beach among them, alleging that they billed the government for millions of dollars to cover trips to exotic resorts, for excessive company car expenses, for alcohol and for unexplained consultant costs.

A GAO analyst testified before the Senate Budget Committee Thursday and released a confidential 1992 GAO report that criticized the firms, saying they submitted questionable overhead bills to the Pentagon. Members of the committee expressed outrage at the allegations of abuse of taxpayer money.

GAO analyst David Cooper told the committee Thursday that Sparta continued to bill the government for such expenses, including $229,000 for travel to Hawaii, after being notified of the GAO investigation.

"In fact, Sparta's practices are quite different," the company says in its statement.

Sparta, which did not attend the hearing to defend itself, said its meeting costs had been fully disclosed to Pentagon contracting officers and that those officers largely approved them as legitimate overhead expenses to be paid by the government.

Although the GAO report does not publicly break down specific questionable expenses company by company, congressional sources identified those incurred by the Orange County firms.

Sparta allegedly billed the government for employee trips to annual stockholders and management meetings. The bills included $333,000 for trips to Grand Cayman Island, Jamaica, Hawaii and Puerto Vallarta, Mexico, the sources said. Other bills considered "unallowable" were $133,200 in meals for spouses of employees, personal use of company cars, alcoholic beverages and inadequately documented consultant fees.

After the company learned of the GAO investigation results in late 1992, Sparta said, it met with a Pentagon contract officer to address expenses for its 1993 annual meeting scheduled later in Hawaii.

"Our charges for that meeting will be strictly in accordance with terms approved by the government," the company said.

A spokesman for Sparta declined Friday afternoon to answer questions about the written release. Officials at SRS Technologies did not return calls for comment.

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