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Unisys Pleads Guilty in Defense Fraud Case

September 6, 1991

ALEXANDRIA, Va. (AP) _ Unisys Corp. pleaded guilty today to criminal charges in the huge Pentagon procurement scandal and agreed to pay the United States up to $190 million to settle claims arising from the Operation Ill Wind investigation.

″This $190 million settlement, the largest ever of its type, should carry a simple but necessary message: where individuals or corporations systematically defraud a procurement program, we’ll use the full extent of the law to punish them,″ said Acting Attorney General William P. Barr. ″The integrity of these programs demands it and the taxpayers deserve no less.″

Unisys Chairman James A. Unruh said in a statement his company ″must accept responsibility for the past action of a few people″ associated with Sperry Corp., which was taken over by Burroughs Corp. in 1986 to form Unisys.

″All of us at Unisys have been angered and frustrated that the actions of a few have cast a cloud over a dedicated, ethical work force,″ Unruh said, adding ″this unfortunate chapter is behind us.″

Bill Beckham, a spokesman for the financially troubled computer maker and defense contractor, said, ″The agreement was structured in such a way to allow us to remain financially viable. Unisys will pay the $190 million over a six-year period with a large part of the payment contingent on future profits.

″It really will have no appreciable impact on our financial ability,″ he said. ″We are absolutely pleased that it’s over.″

Unisys attorney Charles Ruff entered the guilty plea before U.S. District Judge Claude Hilton in the Washington suburb of Alexandria.

Barr said the $190 million includes $162 million in civil damages and penalties, $18 million in civil forfeitures which will go to a Justice Department fund for use in law enforcement, $5 million in criminal fines and $5 million for reimbursement of investigative costs.

Unisys will pay $54 million in cash over five years, starting with a payment of $6.3 million this year. It will pay an estimated $46 million from profits on a radar surveillance system contract that is scheduled to be completed in late 1994, and contingency payments of up to $90 million made through 1997 depending on the asset sales and net income reported by Unisys over that period.

Unisys pleaded guilty to eight counts, including conspiring to defraud the United States, bribery, conversion of government property and filing false statements. Among the counts were related charges of defense procurement fraud pending against Unisys in Brooklyn, N.Y., Albuquerque, N.M., and Corpus Christi, Texas.

It pleaded guilty to bribing former Assistant Secretary of the Navy Melvyn Paisley, former Deputy Assistant Secretary of the Air Force Victor D. Cohen and another Navy official, all of whom were previously convicted on related charges.

Barr said Unisys is the sixth corporation to plead guilty to charges stemming from the four-year-old Operation Ill Wind investigation, with total settlements in fines and penalties reaching $225 million. It was the 51st conviction, Barr said, in cases also against defense consultants, businessmen and government officials.

Five defense contractors have pleaded guilty to a variety of criminal charges stemming from their efforts to illegally obtain confidential bid information submitted to the Pentagon by competitors.

Defense firms hired former Pentagon officials as consultants to use their contacts still in government to obtain the information that the companies hoped to use to tailor their own bids to obtain lucrative military contracts.

Defense subsidiaries of Unisys played a major part in the scandal.

More than a dozen former Unisys executives or consultants have pleaded guilty to various charges and are cooperating with the investigation.

Among those cooperating with the investigation are Charles F. Gardner, a former Unisys vice president who admitted creating a slush fund to bribe government officials and make illegal campaign contributions.

Among other things, Gardner admitted arranging for Unisys to purchase at an inflated price Paisley’s resort condominium.

Paisley pleaded guilty to bribery charges in June, admitting that he helped manipulate one bidding competition to help Sperry obtain a share of a lucrative weapons contract.

When Paisley left the Pentagon in 1987, Unisys hired him as a consultant and within a month paid him $98,000, according to court papers.

Unisys, based in Blue Bell, Pa., is trying to reduce its debt of $3.8 billion by selling certain assets, including its defense division. Industry analysts say this sale has awaited the settlement of the charges.

Last year, Unisys lost $437 million on revenue of $10 billion, including $2 billion in revenue from its defense operations.

Unisys stock was up 12 1/2 cents at $5.62 1/2 on the New York Stock Exchange this morning.

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