Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, July 27, 1990 TAG: 9007270169
SECTION: BUSINESS PAGE: A7 EDITION: METRO
SOURCE: Associated Press
DATELINE: PHILADELPHIA LENGTH: Medium
General Electric, which pleaded guilty to another defense fraud five years ago, also announced it had agreed to pay the government $8.3 million to settle a civil suit stemming from the scheme and $11.7 million to settle unrelated civil charges involving different defense contracts.
The $10 million was the second-largest criminal fine in a defense contracting case, the government said. Northrop Corp. agreed to pay $17 million in February for falsifying records on parts for the cruise missile and Harrier jet.
"This is a sad commentary on the corporate character of General Electric" at the time of the fraud, 1982 to 1984, said U.S. District Judge Lowell Reed Jr.
Assistant U.S. Attorney Nicholas Harbist said GE had since developed self-policing and disclosure safeguards.
GE is the nation's second-largest defense contractor, doing about $6 billion a year in business with the government.
In May 1985, GE pleaded guilty to illegally claiming cost overruns on Minuteman missiles and paid a $1.04 million fine. The company was barred from defense contracting after that, but the ban lasted only three weeks overall and just six months at the division where the violations occurred.
An Army spokesman, Maj. Pete Keating, said Thursday a decision had not been made on whether the company would be banned again.
Two employees of the GE subsidiary involved in the fraud, Management & Technical Services Co., received prison sentences but remained free on appeals.
Gerald A. Leo, 52, of King of Prussia, was sentenced to 10 months in prison and fined $15,000. Leo, the former materials manager at the subsidiary, was convicted of four counts of mail fraud and one count of trying to deceive investigators.
James Badolato, 43, of Springfield, was convicted of one count of obstructing justice and one count of trying to deceive investigators. He was sentenced to five months in prison and fined $10,000.
The judge said neither man had accepted responsibility for his actions. He said Badolato had a "corporate mentality" that he felt "shields him somehow from responsibility."
The case arose from a $246 million contract to make a computer system to monitor supplies in the field. GE and Leo were convicted of not telling the Defense Department when they found subcontractors to make parts at significant savings.
Estimates from both sides of how much money the government lost ranged from $2.5 million to $8 million.
by CNB