Probe of Contracts : New Faces, Old Stars in Arms Drama

WASHINGTON â€”  Operation Ill Wind blew like a hurricane through the homes and offices of Pentagon and defense industry officials over the past two weeks as FBI agents began seizing evidence of what they believe is massive corruption in the $150-billion-a-year Defense Department weapons-buying system.

And the investigation is rapidly accumulating a cast of characters almost as vast and varied as the mountains of documents swept up by the FBI. They range from hard-nosed prosecutors and agile defense attorneys to high Pentagon officials whose conduct is now undergoing intense scrutiny--as well as an obscure group of consultants and mid-level military officials who exert tremendous influence on weapons procurement.

The investigation is still in its early stages. Much remains to be learned about the links among the various players in the drama. And no one has been charged with any crime.

But enough information has emerged to allow an early sketch of some of the key characters. Law enforcement officials say the investigation is not centered on a single conspiracy to corrupt the Pentagon procurement system. Rather, investigators are said to be looking at an interlocking network of consultants and government officials, some with only tenuous ties to one another, allegedly perverting the process by stealing confidential documents and rigging bids on billions of dollars’ worth of military contracts.

Here are thumbnail sketches of the central figures in the drama thus far:

Caspar W. Weinberger:

Weinberger, who served as secretary of defense from January, 1981, until November, 1987, oversaw the Pentagon during most of the period when the alleged abuses took place. He is not under investigation in the case, prosecutors say.

Critics contend that Weinberger’s hands-off management style and the rapid increase in defense spending in the early years of the Reagan Administration contributed to the atmosphere in which procurement rules could easily be bent or broken.

Weinberger says he was not an absentee landlord at the Pentagon but rather a detail-oriented manager who spent 16 hours a day monitoring the giant military bureaucracy. He attributes the suspected corruption to a handful of dishonest individuals inside and outside the Pentagon.

Frank C. Carlucci:

Carlucci served as Weinberger’s deputy during President Reagan’s first term, went into private industry for two years, then returned to government as national security adviser in the wake of the Iran-Contra scandal. He replaced Weinberger at the Pentagon in November of last year.

Carlucci, who wrote a series of procurement reforms in the early 1980s, acted quickly to lift all contract duties from six Pentagon officials who have come under suspicion in the probe. But he said this week it is too early to take action on any of the estimated 75 to 100 military contracts that may have been tainted by fraud or bribery. Carlucci also warned against hasty or incomplete reforms that may make the procurement system worse. He said there is no way to design a weapons-buying program that is “greed-proof.�

He is not suspected of any wrongdoing, prosecutors say, but as with Weinberger the scandal raises questions about his leadership.

John F. Lehman Jr.:

The controversial former Navy secretary was the driving force behind the Navy’s efforts to streamline its procurement system and rapidly expand its fleet of warships. Critics say his methods centralized power in his office and reduced the checks and balances on former Assistant Navy Secretary Melvyn R. Paisley and other Navy officials whose conduct is now at the center of the investigation.

Lehman himself is not a subject of the probe, law enforcement officials say, but a third-party wiretap suggested that Lehman may have tipped off Paisley to the fact that the FBI was investigating him, a source familiar with the investigation said. Paisley and Lehman have known each other for at least a decade, from the time that Lehman was an independent military consultant and Paisley was a Boeing Co. executive working with him. The two also are social friends, associates say.

Lehman resigned as Navy secretary in April, 1987, and is now an executive with the Wall Street investment firm Paine Webber Inc.

Melvyn R. Paisley:

Described by law enforcement authorities as one of the central figures in the scandal, Paisley is the highest-ranking former Pentagon official implicated. Paisley, a high-living former Boeing executive, served as assistant Navy secretary for research, engineering and systems from 1981 until early 1987, when he left to set up his own defense consulting business.

After Lehman and Paisley simplified the Navy’s purchasing rules, industry officials quickly recognized that access to a handful of top Navy officials, including Paisley and his deputy, James E. Gaines, was crucial to winning Navy contracts. Some consultants who boasted of their ties to Paisley saw business boom.

Paisley’s wife, Vicki Paisley, now owns VAMO Inc., a Vienna, Va., firm founded in 1986 by defense consultant William M. Galvin, while Paisley was still at the Pentagon. She also worked for BDM Inc., a large Washington consulting firm that is now a Paisley client.

Galvin and Paisley are business associates and have maintained close social ties that date to Paisley’s tenure at the Pentagon.

A search warrant served on McDonnell Douglas Corp., a Paisley client, alleged that, when Paisley was in the Navy, he tried to steer a major Navy aircraft program to McDonnell Douglas, funneled confidential bidding documents to the aircraft company and used his influence to help McDonnell Douglas in an ongoing competition for a contract with South Korea for sales of the firm’s F-18 fighter.

Law enforcement sources allege that, after Paisley left the government, his chief contact in the Navy was Gaines, a former assistant in international sales at Boeing, who supplied Paisley with numerous classified documents that Paisley sold to his defense contractor clients. His office and home were searched on June 14.

E. Lawrence Barcella Jr.:

Paisley and his wife have retained prominent Washington defense attorney Barcella to handle their cases. Barcella made his name as the assistant U.S. attorney who pursued and prosecuted renegade CIA agent Edwin P. Wilson, who was convicted in 1983 of smuggling explosives to Libya. Another Barcella client was Lyn Nofziger, a longtime friend and political adviser to Reagan. Nofziger was convicted earlier this year of illegal lobbying efforts on behalf of the Wedtech Corp. and two other firms who hired him as a Washington consultant.

Adm. James A. Lyons Jr.:

“Ace� Lyons, a retired four-star admiral, was a favorite of Lehman, who promoted him rapidly and ultimately made him commander in chief of the Pacific fleet over the protests of many senior uniformed officers. Lyons is not a target of the investigation, officials say, but his name appears on the search warrant served on McDonnell Douglas. Federal agents said they were seeking information about his consulting activities on behalf of the company, particularly regarding sales of F-18 fighters to South Korea.

Lyons was recommended to McDonnell Douglas by Paisley, who knew him from his days at the Navy Department. Lyons and Lehman became friends in the late 1970s, when the admiral was one of Lehman’s chief contacts in the Navy.

He was forced into retirement last fall by Lehman’s successor, former Navy Secretary James H. Webb Jr.

William M. Galvin:

Galvin, a well-connected defense consultant, has emerged as another of the primary figures of the unfolding investigation. He has been a consultant to five companies whose offices were searched by the FBI: Unisys Corp., Cubic Corp., Loral Corp., Norden Systems and United Technologies Corp.

Galvin’s Watergate complex office in Washington was searched, as was the office of his stepson and sometime accountant, Kenneth F. Brooke. His daughter, Joan Galvin, was reassigned from her duties as a defense aide to Rep. Andy Ireland (R-Fla.) in the wake of the searches.

Galvin is a member of the board of Armtec Inc., a Palatka, Fla., defense contractor whose offices were searched and whose president, William W. Roberts, was questioned by the FBI. Roberts is a close friend of Rep. Bill Chappell Jr. (D-Fla.), the influential chairman of the House Appropriations subcommittee on defense, who is said by prosecutors to be under scrutiny but who has not been served with a subpoena or search warrant.

Galvin formed a small consulting firm, Sapphire Systems Inc., one of whose directors was Charles F. Gardner, then a senior Unisys executive who had earlier retained Galvin as a consultant to Unisys. Sapphire dealt with William Sanda, a consultant and former Navy employee whose office also was searched.

Galvin, whose phone reportedly was tapped by the FBI, entertained Pentagon and industry figures lavishly and boasted of his access to Paisley, associates said.

Kenneth F. Brooke:

A Vienna, Va., defense consultant, Brooke is Galvin’s stepson and an officer of Galvin’s Locus Ltd. consulting firm. His home was searched on June 14.

Brooke is an avid golfer who associates say spent more time on the links than in his nominal job as a defense consultant. He worked for at least two of Galvin’s companies but has since gone into business himself.

James E. Gaines:

Gaines is one of five current Pentagon officials served with search warrants two weeks ago, and one of six officials who have been relieved of sensitive contracting duties. The sixth Pentagon employee has not been identified.

Gaines’ title is deputy assistant Navy secretary for acquisition management and international programs, giving him access to Navy purchasing plans and putting him in a key position to aid defense firms seeking Navy contracts.

Gaines is a former official of Boeing, where he worked under Paisley. He joined the Seattle aircraft maker in 1956 in the firm’s planning department but moved into marketing and sales in the early 1970s, according to company officials. From 1978 until 1985, when he left to work for the Pentagon, Gaines was Boeing’s manager of direct sales.

Charles F. Gardner:

Gardner, also identified by investigators as a central figure in the probe, is a Long Island defense consultant who resigned in March, 1988, as a Unisys executive. He hired Galvin as a consultant to Unisys and, while still a Unisys executive, became a director of Sapphire Systems. His phone was tapped as part of the investigation and law enforcement sources said conversations led to questions about lawmakers Chappell and Rep. Roy Dyson (D-Md.), a member of the House Armed Services Committee. Gardner was a campaign contributor to both congressmen and entertained them in New York. Gardner’s home in Malverne, N.Y., was searched June 14.

At Unisys, Gardner was vice president and general manager of the surveillance and fire control division of the company’s Shipboard and Ground Systems Group, which is based in Great Neck, N.Y. In that post, he was responsible for Unisys’ contract for the Aegis radar defense system for the Navy’s most advanced warships. Unisys won bidding to be a second source for the Aegis system after Paisley abruptly revised the bidding rules in a way that favored Unisys.

Rep. Bill Chappell Jr.:

Chappell, a Florida Democrat, chairs the House Appropriations subcommittee on defense, a critical link in the Pentagon funding chain. Although he was not served with a search warrant as the probe unfolded, law enforcement officials say they are looking at his relationships with a number of consultants and companies under scrutiny.

Chappell has denied any involvement in procurement irregularities but acknowledges an acquaintanceship with Gardner and several other figures in the probe. He says that because of his committee post he sees as many as 100 defense industry executives and consultants a day.

The Florida lawmaker is one of Congress’ largest recipients of defense industry political contributions and speech fees, according to campaign finance records.

Rep. Roy Dyson:

The Maryland Democrat sits on the House Armed Services Committee and its procurement and sea power subcommittees. Federal officials say they are studying his links to Galvin and Gardner, who entertained him and his top aide, Tom Pappas, in New York last month. On that trip, Pappas apparently leaped to his death from a Manhattan hotel room the same day that the Washington Post ran a story questioning his “unorthodox� demands on staffers.

Dyson, who has not received a search warrant or subpoena, has denied any impropriety in military procurement. He has received campaign contributions and honorariums from Gardner, Unisys and a substantial number of other major defense contractors.

Thomas Muldoon:

Muldoon, a Washington defense consultant, was served with a search warrant on June 14. Like several other figures in the case, Muldoon is a former Unisys employee. His consulting business clients include Unisys and Litton Industries Inc.’s Data Systems subsidiary, both of which were searched by the FBI.

Muldoon is a friend of Mark C. Saunders, an Alexandria, Va., defense consultant and one of the people whose offices were searched.

William Parkin:

Parkin, an Alexandria, Va., defense consultant, worked in the Navy’s Joint Cruise Missile Project office from 1977 to 1983, first as chief of the program’s contracting division, later as deputy for acquisition. Parkin was served with a search warrant on June 14.

Parkin went to work for Galvin after he left the Navy, doing some part-time consulting for Galvin’s Sapphire Systems. He now runs his one-man consulting business from an office in a small Crystal City, Va., apartment building.

Among Parkin’s consulting clients is Hazeltine Corp., one of the companies searched, which was trying to win a Navy contract supervised by Navy official Stuart E. Berlin involving an electronic aircraft identification device. Berlin is one of the Pentagon officials whose offices were searched.

Parkin allegedly worked with Woodland Hills consultant Fred H. Lackner on the aircraft identification program.

Stuart E. Berlin:

Berlin, another of the Pentagon officials who has been stripped of contracting duties and reassigned, has headed the ship systems engineering branch of the Naval Air Systems Command since October, 1986. Investigators reportedly are looking for records of payments from consultant Lackner to provide critical bidding documents for their clients. Berlin’s Pentagon office was searched on June 14.

Victor D. Cohen:

Cohen, deputy assistant Air Force secretary for tactical systems acquisition, is a former employee of Northrop Corp. and Grumman Aerospace Corp. His office was searched and sealed and he has been relieved of contracting responsibilities.

Cohen, who holds a doctorate from Stevens Institute of Technology in Hoboken, N.J., is a specialist in analyzing weapons systems. From 1972 to 1978, he was an analyst at the Institute for Defense Analyses in Alexandria, Va., a government-funded military think tank.

Cohen had frequent social and business contacts with Galvin, associates said.

Seymour Glanzer:

Glanzer, who represents Cohen, is a well-known Washington defense attorney with the firm of Dickstein, Shapiro & Morin. He was one of the three original federal prosecutors who investigated the Watergate break-in before a special prosecutor was named.

Fred H. Lackner:

Lackner is a Woodland Hills resident now working as an independent consultant for aerospace companies. His home was searched June 14.

The search of Berlin’s office suggests that agents might have been looking for records of payments from Lackner to Berlin, Aviation Week and Space Technology magazine said.

Lackner has worked for a large number of aerospace companies in his career. Former employers include Northrop Electronics in Hawthorne; Stromberg Carlson Corp. in Winter Park, Fla., then a unit of General Dynamics and later a subsidiary of United Technologies; Ocean Technology Inc. in Burbank; American Nucleonics Corp. in Westlake Village, and the Systems Development unit of Unisys in Camarillo.

Lackner resigned from Ocean Technology in 1985 after company officials confronted him with allegations that he attempted to recruit the firm’s Washington office manager to work with him in an outside consulting operation.

Ocean Technology executives said the proposition posed the possibility of direct competition with Lackner’s responsibilities with their firm.

Mark C. Saunders:

Saunders, a defense contract consultant, works out of his home in Alexandria, Va., which was searched on June 14.

A one-time senior civilian purchasing officer at the Navy’s electronic systems command, Saunders was fired after he pleaded guilty in 1982 to criminal and civil charges of using confidential information obtained from his job for insider stock market trading.

George G. Stone:

Stone is the director of the Information Management Services and Information Transfer Purchase Division within the Navy’s Space and Naval Warfare Systems Command.

An upper-level civilian employee, Stone has been in civil service since January, 1961. He replaced Saunders when Saunders was fired from the Navy.

Stone, whose office was searched June 14, was one of the six Defense Department employees reassigned.

Jack A. Sherman:

Sherman, 52, was the first Defense Department employee to be implicated in the fraud inquiry and one of those served with a search warrant June 14, sources close to the investigation said.

Sherman, a $56,221-a-year civilian employee of Installations and Logistics Division of the Marine Corps, was one of six relieved of procurement duties.

Sherman is a former Marine who worked as a civilian for the Navy from 1957 to 1971 before transferring to a civilian job in the Marines.

William Sanda:

Sanda, a former Jesuit seminarian, is president of Strategic Systems Institute in Rockville, Md., a one-man defense consulting outfit, which was searched.

He is a former executive of Unisys’ Eagan, Minn., plant, one of the sites searched two weeks ago. He worked briefly for the Naval Research Laboratory before opening his own shop.

Scott Lamberth:

Lamberth is a former employee of Whittaker Command and Control Systems Inc. in Farmington, Ark., one of the firms searched on June 14. Lamberth’s home was searched a week later. He recently left full-time employment at the company and is now a consultant to the firm.

Dennis Mitchell:

Mitchell is a marketing manager for Unisys’ Great Neck, N.Y., facility, which performed the Navy’s Aegis work, among other military projects. FBI agents carried out a search of his home last week.

James Neal:

Neal is head of James Neal & Associates, a consulting firm in the Washington area searched last week.

Richard Seelmeyer:

Former top aide to the late Rep. Joseph P. Addabbo (D-N.Y.), powerful head of the House Appropriations subcommittee on defense, Seelmeyer now publishes an obscure newsletter called Capitol Hill Defense Digest. FBI agents searched his Berwyn Heights, Md., home Tuesday. Prosecutors are studying Addabbo’s role in helping win contracts for numerous defense firms, including Unisys.

Henry E. Hudson:

Hudson is the U.S. attorney for the Eastern District of Virginia, based in Alexandria, just across the Potomac River from Washington. As former prosecutor in Arlington County, Va., Hudson became known as an anti-pornography crusader vowing to wipe out the massage parlors and smut houses in the Washington suburb. For his efforts, he was named chairman of the presidential Commission on Pornography in 1985.

Hudson has told members of Congress that his office is overseeing the largest investigation of Pentagon corruption in history, involving as many as 15 major defense firms, 100 tainted contracts and billions of dollars’ worth of military purchases.

The probe began quietly in 1986 when Navy investigators brought a complaint to the FBI’s Alexandria office, which lies in Hudson’s jurisdiction. Hudson took the original thread and has begun to unravel a scandal whose dimensions are only beginning to take shape.