THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Tuesday, September 13, 1994 TAG: 9409130331
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY MARC DAVIS, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: Long : 126 lines
Two years after pleading guilty to federal conspiracy charges, Computer Dynamics Inc. and founder R. Alan Fuentes are in trouble again.
On Monday, the Navy announced that it will ban Fuentes, CDI and its chief executive officer, Robert L. Starer, from future government contracts.
The Navy accused CDI and the two owners of hiding Fuentes' employment contract after his 1992 criminal conviction. If true, this would violate the Navy's agreement with CDI after the conviction.
Fuentes and CDI pleaded guilty in 1992 to funneling $14,000 through employees to then-U.S. Sen. Paul Trible's re-election campaign. The company was fined $25,000; Fuentes was fined $50,000. He also resigned from the company and converted his stock into nonvoting stock.
But on Monday, the Navy accused Fuentes and Starer of concealing Fuentes' $250,000-a-year employment contract so CDI would not be barred from government work.
The Navy does not say that CDI is still paying Fuentes under that contract, but notes that the company did pay him for five months after his 1992 resignation.
``Both CDI and Mr. Starer are lacking in the business honesty and integrity necessary to do business responsibly with the federal government,'' concludes the report from the Navy's Procurement Integrity Office.
A separate report on Fuentes reaches the same conclusion.
CDI is a multimillion-dollar company providing computer sales, service and training. At one time, the company relied entirely on government contracts. Now, about 35 percent of its business is for the government, Starer said.
Last year, the company won at least $9 million in government contracts. The year before, it was more than $14 million. The Navy's proposed action - a ``debarment'' - would not affect current contracts, but they could not be renewed.
Both Fuentes and Starer said Monday they will fight the proposed action.
``I'm astonished,'' Starer said. ``It appears to me the nub of this is somebody believes there is some sort of sub rosa business relationship between myself and Mr. Fuentes. Anybody who believes in that believes in the tooth fairy.''
Indeed, Fuentes and Starer have a very strained relationship. Fuentes openly condemns Starer, whom he accuses of stealing the company. Starer owns 70 percent of CDI; Fuentes owns 30 percent. Fuentes is suing Starer and CDI for $18 million.
On Monday, Fuentes again attacked Starer personally, saying he feels ``totally vindicated'' by the Navy reports.
``I've always known that Starer not only has shot me in the back and has emptied my pockets, but has done the same to the United States government,'' Fuentes said. ``The facts are just now coming out, and there will be much, much more.''
The new controversy stems from two contracts between Fuentes and CDI.
In October 1991, three months before his conviction, Fuentes signed a $250,000-a year employment contract with CDI. It was to have run five years, with renewals for another 25 years. Starer signed the contract for CDI.
In January 1992, at the same time he resigned and pleaded guilty, Fuentes signed another contract. This one guaranteed his right to be paid under the employment contract, despite his resignation. Starer signed this contract, too.
Over the next five months, CDI paid Fuentes $89,000, mostly in payments of $21,000 a month - roughly what he would have gotten from his employment contract. Fuentes says this was his salary. Starer says this was an advance on dividends.
CDI officials have repeatedly disavowed Fuentes' contract, saying it was never valid. The Navy, however, does not believe CDI or Starer.
``There is nothing in the record that demonstrates a final resolution of the (employment) contract has ever been achieved,'' the Navy report states. ``In fact, the record suggests that Mr. Fuentes was paid under the 9 January agreement, Mr. Starer's assertions to the contrary notwithstanding.''
Starer said the Navy's report is filled with factual errors. ``We run a very clean, ethical shop,'' Starer said. ILLUSTRATION: CHRONOLOGY
A year in the life of R. Alan Fuentes:
Oct. 4 - Sues his former company, Computer Dynamics Inc., and its
chief executive officer, Robert Starer, for $18 million.
Nov. 30 - Files for reorganization in Bankruptcy Court.
Dec. 1 - CDI sues Fuentes for $2 million.
Dec. 13 - Fuentes sues former financier of his racing boat team for
$265,000.
July 16 - Jailed six days for failure to pay child support.
July - Convicted of abduction in a custody dispute over his
8-year-old son. Sentenced to 10 days in jail. Appealed. New trial
set for next week.
Monday - Navy recommends that Fuentes, Starer and CDI be barred
from government work.
\ CDI's TROUBLES
CRIME: In 1986, CDI funneled $14,000 to Sen. Paul Trible's
campaign. Alan Fuentes was the company's sole owner at the time.
PUNISHMENT: Fuentes and CDI pleaded guilty in 1992 to felony
charges. Fuentes was fined $50,000 and sentenced to three years
probation and 360 hours of community service. The company was fined
$25,000.
SHAKEUP: Fuentes had to resign from CDI so the company could keep
its military contracts. At the time, CDI got almost all its money
from such contracts. The Navy required that CDI remove Fuentes from
its payroll.
COMPLICATION: Fuentes still had a $250,000-a-year employment
contract with CDI. The company continued to pay him for five months
after his resignation.
MORE PUNISHMENT: The Navy learned of Fuentes' employment contract in
1993. On Monday, the Navy recommended barring Fuentes, CDI and the
company's chief executive officer, Robert Starer, from government
work for hiding the Fuentes contract.
KEYWORDS: U.S. NAVY ALAN FUENTES COMPUTER DYNAMICS by CNB