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Official Denies Charges Under Oath

April 15, 1985

WASHINGTON (AP) _ The chief financial officer of the General Dynamics Corp., complaining that the giant defense contractor has been put through ″a cruel and unjustified ordeal,″ denied under oath today that the company deceived the Navy on a trouble-plagued submarine-building contract.

Gorden E. MacDonald, the corporation’s executive vice president for finance and administration, told a congressional committee that allegations the company kept two sets of books - one false, the other accurate - are untrue.

MacDonald did acknowlege that there are memos in corporate files containing varying estimates on the number of manhours and the costs required to fufill contracts to build 18 attack submarines for the Navy.

But, in testimony before the congressional Joint Economic Committee, he dismissed these memos as the opinions of ″different people working from different perspectives and operating on different assumptions.″ He said none of them represented the official position of the corporation.

But Sen. William Proxmire, D-Wis., disagreed, saying there is substantial documentary evidence that General Dynamics kept two sets of records on its submarine contracts, one ″grossly inaccurate″ and made available to the Navy, the other essentially correct but kept from the Navy.

″It seems to me General Dynamics deceived the Navy and knew at the time that it was deceiving the Navy.″ Proxmire said.

The conclusion that General Dynamics kept two sets of books on key elements of progress being made in fufilling the submarine contracts was reached in a report written by Richard Kaufman, a senior committee staff member. The report was issued April 2.

Kaufman also concluded that General Dynamics received a second contract to build additional submarines by concealing from the Navy evidence that substantial cost overruns had been incurred on the iniital contract.

MacDonald, who was acting general manager of the Electric Boat Division for parts of 1976 and 1977, denied this allegation also.

The Navy eventually paid a total of $2.5 billion for the 18 ships, the last of which was delivered in December 1984, 46 months late.

The Navy payments included about $1 billion in cost overruns, including $739 million for the settlement of claims submitted by the company.

MacDonald voiced the company’s longstanding position that the delays and cost overruns were caused by countless design changes and that these were largely caused by the ″inability″ of the Newport News Shipbuilding Co., the lead submarine-building contractor, to provide neccessary data in a timely fashion.

He said this made it impossible for the Electric Boat Division of General Dynamics to build its allotted 18 submarines on schedule.

″To the best of my knowledge and belief, no one at Electric Boat or in General Dynamics improperly delayed the disclosure of new cost or schedule estimates so as to deceive the Navy, the shareholders or any one else,″ MacDonald said.

And he noted the finding of an initial Justice Department investigation of the claim that there was ″not one scintilla of evidence″ to justify indicting General Dynamics.

″This conclusion was absolutely correct, and is precisely the position that the company has taken throughout this cruel and unjustified ordeal,″ MacDonald said.

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