THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Wednesday, November 9, 1994 TAG: 9411090295
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY JOE JACKSON, STAFF WRITER
DATELINE: NORFOLK LENGTH: Medium: 81 lines
Since 1988, South Carolina defense contractor Richard O. Kneece expressed his gratitude for winning Army contracts at Fort Eustis in cold, hard cash.
The recipient of Kneece's largesse was a Fort Eustis Army official in charge of a project that produced thermal images of enemy vehicles used in target practice in bases nationwide. In 1988, the official told Kneece that ``he was tired of making money for other people and not for himself,'' court records show.
So the two men made a deal. The arrangement was lucrative.
Kneece's company, Custom Training Aids Inc. of Swansea, S.C., realized at least $675,000 in profits. The Army project manager got $260,000 in illegal gratuities.
But the good times ended when the two got caught in a joint investigation by the Army's Criminal Investigation Service and the FBI. On Tuesday, Kneece pleaded guilty in U.S. District Court under federal bribery statutes to one count of giving an unlawful gratuity to a public official. Kneece's company pleaded guilty to the same charge.
The bribery case is the biggest involving defense contractors and local military officials that federal prosecutors could recall in the past five years. The case included a $1.6 million contract awarded to Custom Training Aids in June 1991 - the Army's largest contract to date for the purchase of materials used to make thermal targets, court records showed.
The Army official, whose name was not released Tuesday, used his influence to ensure that Custom Training Aids won contracts. In exchange, Kneece agreed to give the official one-third of the company's gross profits from any contract he won.
When Kneece is sentenced on Jan. 24, he faces a maximum of two years in prison and a $250,000 fine. The company faces a maximum fine of $500,000, five years' prbation and disbarment from bidding on federal contracts.
The Army official will be prosecuted in the near future, said Assistant U.S. Attorney Alan Salsbury. The case is still under investigation.
The thermal targets were silhouettes cut from strand board and sprayed by robots with an electrically charged paint. The Army developed the process but bought the materials from private contractors, records showed. Since the mid-1980s, contracts were awarded on competitive bids.
In late 1988, Kneece and an associate met the Army official at Patrick Henry Airport in Newport News, where Kneece paid him $10,000 in cash. The money was not for any particular contract, but rather was made on the promise of ``general favorable future consideration,'' Salsbury said.
Then, in August 1989, Kneece's company was awarded a contract to supply the Army with equipment needed to produce training mines. During prior negotiations, Kneece sent the official a cost estimate of $175,000. The Army official revised the figure to $195,000 and returned the estimate to Kneece.
``It was understood that Kneece was to resubmit the cost estimate back to the Army official at the higher figure, and that Kneece would subsequently pay the Army official'' the $20,000 difference, records show.
Custom Training Aids was awarded the contract on a bid of $192,990. In late 1989, Kneece again flew to Patrick Henry Airport, where he paid the official $25,000 in cash.
``The additional $5,000 was added as a gesture of Kneece's gratitude,'' Salsbury said.
Then, in 1990, the $1.6 million contract came up for bid. In December of that year, Kneece set up a $25,000 bank loan for the Army official in a Columbia, S.C., bank in the form of a certificate of deposit. This also was a goodwill payment to the official.
Kneece estimated that the company's profits would be about $600,000 from this contract. He agreed to pay the official one-third of this, or $200,000.
The gratuity was paid in four checks, records show. Each check was drawn on Custom Training Aids' checking account and made payable to Hybrid Material Co., a fictitious name selected by the Army official. The official then deposited the money at a Columbia bank in the name of Hybrid Material Co.
``The payment of an unlawful gratuity improperly rewards a government employee for past official conduct and can, as in this case, be intended to gain favors in the future,'' Salsbury said after the hearing. ``This erodes public confidence and potentially distorts the honest exercise of judgment by government officials.''
KEYWORDS: BRIBERY DEFENSE CONTRACTORS by CNB