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Lawsuits Put Military Contractor on Defensive

The San Diego-based Titan Corp. is embroiled in allegations that include bribery.

June 07, 2004|Paul Pringle | Times Staff Writer

Titan Corp. is big on secrecy. Some say too big.

The San Diego-based defense contractor is prized in industry circles for its large roster of workers with security clearances, folks entrusted to keep mum.

"We're proud of that," said Gene Ray, Titan's board chairman, president and chief executive.

Lately, Titan finds itself with extra incentive to button lips. The 12,000-employee, information-technology company is entangled in controversies over the suspected bribery of foreign officials and a report placing one of its Arab-language translators at the scene of prisoner abuses in Iraq.

"I'd rather just not comment on it," Ray said.

Silence aside, a look at Titan offers a lesson in how contractors can thrive on their ability to swiftly respond to the government's crisis-mode needs -- with the help, critics say, of generous campaign contributions.

It also provides a primer on how things can suddenly go wrong.

Titan's troubles have clouded its proposed acquisition by Lockheed Martin; a $1.8-billion merger awaits the outcome of two federal investigations into the alleged bribes.

A Titan shareholder vote on the transaction is set to be completed today, and Wall Street analysts predict the buyout eventually will happen.

But some shareholders have filed lawsuits against Titan, contending that Ray and other executives either concealed their knowledge of the purportedly illicit payments -- or, if in the dark, breached their fiduciary responsibilities by not preventing them.

The suits note that Lockheed lowered its merger bid by $160 million after an internal audit of Titan triggered the bribery inquiries.

"We do not believe there is merit to those lawsuits," said Ray, 66, speaking from his San Diego home.

Meanwhile, Titan's business in Iraq has heightened the debate over the Pentagon's increasing dependence on contractors for sensitive and often dangerous missions.

To date, the only direct Titan connection to the abuses at Iraq's Abu Ghraib prison is an employee, Adel Nakhla, who was named in Army Maj. Gen. Antonio Taguba's report on the mistreatment of detainees. Nakhla translated for military police officers implicated in the abuses, according to the report.

A Titan spokesman said the government has not told the company that any of its workers is a suspect in the Abu Ghraib investigation. Titan has dismissed Nakhla, but has not disclosed the reason. Nakhla could not be reached for comment.

Titan has other problems in Iraq. The Army has withheld about $3 million in payments for Titan's translators because of a review of "deficiencies" in the firm's labor accounting practices, which Ray said have been corrected.

A far greater cost has come in lives. At least 16 Titan translators have been killed in Iraq.

"We're very saddened by the loss of life," Ray said. He declined to talk about the deaths in detail, saying to do so would imperil more translators. "They've put themselves in harm's way," he said.

Ray is a former Pentagon physicist who founded Titan in 1981 with Albert Knauf Jr., who also spent time at the Pentagon, and industry veteran John McDougall.

The start-up scored contracts with the Reagan administration's Strategic Defense Initiative, the so-called Star Wars program that had sought to build a space-based, missile-intercepting system.

Titan also supplied the military with software for satellite communications, radar and other applications and did business with civilian agencies.

After the end of the Cold War led to cuts in defense spending, Titan and its competitors diversified into the private sector. Titan tried to establish commercial markets in information technology, telecommunications and the use of electronic irradiation to sterilize food and medical products.

Most didn't pan out, and the sterilization venture pitted Titan against consumer organizations, such as Public Citizen, which contended that irradiating meat, fruit and vegetables posed a health risk.

Public Citizen's battles with Titan and its subsidiary SureBeam turned ugly. The company accused the organization of distorting the science behind irradiation. In late 2001, after Titan had partially spun off SureBeam, Public Citizen charged that someone attempted to smear two of its advocates by anonymously sending information on their personal lives to media outlets.

The material was never linked to Titan -- Ray said the firm had nothing to do with it -- but Public Citizen energy and environment Director Wenonah Hauter still harbors suspicions.

"It was just nastier with Titan," she said. Public Citizen has also criticized Titan's no-bid, $38-million contract with the U.S. Postal Service to irradiate mail for anthrax spores. The contract followed the 2001 anthrax letter-taintings that killed five people.

Because the eight SureBeam machines delivered under the contract could not sanitize large volumes of mail at high speeds, they were transferred to other government agencies and Idaho State University.

Public Citizen maintains that the anthrax contract was a boondoggle.

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