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Defense Contractor Indicted on Fraud Charges

March 27, 1985

PHILADELPHIA (AP) _ General Electric Co., faced with $800,000 in cost overruns on nuclear- warhead contracts, charged the amount to other government projects, according to an indictment against the nation’s fourth-largest defense contractor.

GE on Tuesday denied any criminal wrongdoing and said it would ″work out all the issues arising out of this matter.″

The company ″mischarged″ the government for the $800,000 in overruns on a contract for refitting components for the Minuteman Mark-12A intercontinent al ballistic missile re-entry system, said U.S. Attorney Edward Dennis.

The 112-count indictment resulted from a four-year investigation arising from irregularities uncovered by a routine Defense Contract Audit Agency probe of GE’s internal accounting, Dennis said.

GE is charged with four counts of ″making and presenting false claims to the United States″ and 104 counts of making false statements to a U.S. agency by falsifying employee time cards.

GE employee Joseph Calabria and former employee Roy Baessler are charged with two counts each of ″making false declarations″ to a grand jury.

GE spokesman John Terino, reading from a statement after the indictment was announced, said the company denies any wrongdoing but is willing to cooperate in resolving the matter.

″It is alleged that incorrect charges were entered on employee time cards submitted five years ago,″ said Terino. ″Involved are 100 time cards out of approximately 100,000 time cards.

″GE has indicated its willingness to reimburse the government for any improper charges that might have been made. ... We are confident we can work out all the issues arising out of this matter and continue our role as a responsible supplier of the nation’s defense needs.″

GE’s Re-entry Systems Division - now part of its Space Systems Division based here - had a series of contracts to refurbish missile re-entry vehicles, which carry warheads and arming and aiming systems, the indictment said.

One agreement for test equipment was a fixed-price incentive contract, meaning the Air Force would pay all costs up to a ceiling and GE would absorb any overruns, it said. ″As alleged in the indictment, by approximately March 1980, GE had exceeded the price ceiling on the contract,″ Dennis said.

From about Jan. 1, 1980, until April 1983, GE made up the $800,000 on other government contracts by altering employee time cards, having employees submit blank cards which were filled in by managers, and transferring costs to other contracts that didn’t have ceilings, Dennis said.

Calabria, 50, of King of Prussia, chief engineer at the Re-entry Systems Division, and Baessler, 40, of Topsfield, Mass, each face up to 10 years in prison and a 20,000 fine.

″Pure and simple, neither Roy Baessler nor Joseph Calabria made a false declaration to the grand jury, and there is no question that they will be fully vindicated after a trial in this case,″ said their attorney, Walter M. Phillips of Philadelphia, in a statement.

GE faces a $1.08 million fine and possible loss of all or part of its defense contracts. The company and its subsidiaries received more than $4.5 billion in military contracts in fiscal 1983, fourth among defense contractors, according to the most recent statistics available from the Pentagon.

The only other top defense contractor to face criminal charges was the Sperry Corp., said a Pentagon official who spoke on condition of anonymity.

Sperry, the No. 20 defense contractor, pleaded guilty Dec. 9, 1983, to making false statements about Minuteman and MX missile contracts. It was fined $30,000 and ordered to pay damages of $650,000 and interest of $167,740.

General Dynamics, the nation’s largest defense contractor in fiscal 1983, faces audits and investigations by the Pentagon and outside agencies, including a federal grand jury probe. The company, however, has not been indicted.

General Electric’s 1983 contracts included supplies such as washing machines and light bulbs, as well as nuclear-missile warheads and engines for the B-1 bomber and the F-14, F-15 and F-16 fighter planes.

Its stock closed Tuesday at 593/4 on the New York Stock Exchange, down 11/4 in active trading.

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