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URGENT Pentagon Resumes Payments

July 30, 1985

WASHINGTON (AP) _ The Pentagon, satisfied the General Dynamics Corp. has made progress in strengthening its internal accounting controls, has resumed monthly payments to the firm for its general overhead payments, a top Navy official said today.

Everett Pyatt, the assistant secretary of the Navy for shipbuilding and logistics, said the Pentagon was also prepared to release roughly $100 million of the $437.8 million withheld since a payment-suspension order was issued March 5 by Defense Secretary Caspar W. Weinberger.

Pyatt said he was unable to immediately estimate the amount of the monthly payments that have been resumed because they have been reduced based on the results of various audits. Before the payment suspension, which Pyatt said was formally lifted Thursday, the overhead fees were running between $30 million and $40 million a month.

Pyatt also disclosed, however, that a separate Navy ban on the awarding of new contracts to General Dynamics’ Electric Boat and Pomona divisions would remain in place for the time being. Contracts totaling roughly $1 billion are being held up, he explained, until several longstanding Navy contract disputes are resolved.

Pyatt also said the balance of the amount withheld over the past 41/2 months - roughly $337 million - would continue to be held by the Pentagon pending completion of additional audits and reviews.

The Navy official said the Pentagon was now satisfied that General Dynamics had instituted tougher guidelines to prevent employees from submitting unallowable expense claims. He said the Navy and Pentagon were both strictly enforcing a new regulation requiring executives to certify claims are proper under penalty of perjury.

Pyatt cautioned, though, that the Pentagon was not offering General Dynamics a ″total clean bill of health.″

He said auditors had discovered ″general sloppiness″ in the company’s accounting sections but had been unable ″to trace blame to a management policy″ that specified the filing of even clearly improper claims.

″But the game is catch me if you can,″ Pyatt said, adding he would prefer to see the use of more fixed-price contracts.

General Dynamics, the nation’s third-largest defense contractor last year with contracts totaling $6 billion, became the most visible target of a ″get tough″ policy ordered by Weinberger last spring amid disclosures the firm had billed taxpayers for such things as country club expenses and dog kennel fees.

General Dynamics executives have consistently denied any wrongdoing, while acknowledging their internal accounting controls left much to be desired. The company has already paid a $676,283 fine for allegedly providing improper gifts to retired Navy Adm. Hyman G. Rickover, and the firm’s long-time chairman, David S. Lewis, has announced he will retire this year.

Al Spivak, a company spokesman, said the company has changed its accounting controls to ensure only ″accurate and legitimate overhead billings on defense contracts.″ He hailed today’s announcement as ″an important step in the re- establishment of normal business relationships with the Department of Defense and the military services.″

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