“Worse than traitors in arms are the men who pretend loyalty to the flag, feast and fatten on the misfortunes of the nation while patriotic blood is crimsoning the plains of the south and their countrymen are moldering in the dust.” —Abraham Lincoln

" To Sin By Silence, When We Should Protest, Makes Cowards Out Of Men "
~ Ella Wheeler Wilcox

"Military Contractors Challenging Whistleblower Law"

Midway through the Civil War, somebody in Washington figured something was rotten on the battlefields of Virginia. The cavalry was being sold the same horses two and three times over. The Army tried to fire its gunpowder and found it had been blended with sawdust. Instead of "serviceable muskets and pistols," recounted one journalist of the day, the government got "the experimental failures of sanguine inventors."

An outraged Congress, declaring that "it takes a rogue to catch a rogue," enlisted private citizens in the war on military contracting fraud, adopting a statute that would entice them to come forward by allowing them to file civil fraud lawsuits on behalf of the government and share in any fines or settlements collected. The 1863 statute was little used, however, in part because employees who filed lawsuits against their bosses often found themselves unemployed shortly thereafter.

But, more than a century later in 1986, Congress injected new life into the False Claims Act with a series of amendments that targeted modern-day rogues, provided job protections for private citizens who blew the whistle and increased the amount of money they could collect if they could prove their claims in court.

In the wake of the amendments--and with more than 140 whistle-blower lawsuits on the books alleging billions of dollars in overcharges on programs from the stealth bomber to the Apache helicopter--a federal judge in Los Angeles today will consider the first constitutional challenge to the updated statute.

Some of Southern California's largest defense contractors, including Hughes Helicopters Inc., McDonnell Douglas Inc., Parker Hannifin Corp. and the Northrop Corp., have said Congress erred when it took the responsibility for prosecuting government fraud out of the hands of the Justice Department and gave it to private citizens.

But defenders of the statute--including the U.S. Senate, which will argue on behalf of the act in court today--say the challenge threatens to disarm what has become one of the nation's principal weapons against fraud on the federal Treasury.

The False Claims Act, they say, has forced major corporations to defend themselves against what may be frivolous claims by disgruntled employees. Some say the statute may actually prevent companies from clamping down on fraud within their subdivisions. Instead of going to their supervisors when they uncover evidence of wrongdoing, they say, employees are encouraged to keep quiet, hire a lawyer and sue the boss.

"The way it's structured, it really pits employees against management, and I think it induces employees not to say anything when something goes wrong," said Phillip Friedman, president of Genisco Technology Corp., which was ordered in November to pay $725,000 in a False Claims Act suit for falsifying test data on several key military components, including a Navy torpedo simulator. A former Genisco employee, Roland Gibeault, will get $131,250 of the settlement.

But defenders of the statute--including the U.S. Senate, which will argue on behalf of the act in court today--say the challenge threatens to disarm what has become one of the nation's principal weapons against fraud on the federal Treasury.

"Fraud, especially in the defense industry, is really an out-of-control problem," said John Phillips, a Los Angeles attorney who drafted the 1986 amendments to the act. "You'd hear daily reports about $500 toilet seats and $200 wrenches, but I had talked to a number of people who'd come into my office over the years and said, gee, they worked for defense contractors, they knew people who were deliberately gouging the government, and what should they do?"

Under the act, private citizens who have knowledge of government fraud can become what is known as qui tam plaintiffs. They are effectively deputized as agents for the government under an old doctrine of English law, qui tam pro domino rege quam pro seipso: "he who as much for the king as for himself."

Such lawsuits are initially filed under seal, giving the Justice Department 60 days in which to investigate a plaintiff's claims and decide whether to join the suit. Of 141 cases filed so far, the department has joined 20, declined to join 68 and has the rest under consideration. Only a handful of the cases have so far been settled.

Even if the government declines to take over as lead prosecutor, a private plaintiff can pursue the case and share up to 30% of whatever damages are collected. And even if the government does decide to intervene, the private plaintiff remains a party to the case and must agree on any settlement ultimately negotiated.

It is the act's delegation of that prosecutorial authority to private citizens that has formed the basis of the two pending constitutional challenges. They allege that Congress violated the Constitution's separation of powers doctrine when--unhappy with the Justice Department's record on defense fraud--it effectively usurped the executive branch's authority.

"The important point is that Congress reached its own conclusion as to the effectiveness of prosecutions by the executive branch, and then unconstitutionally usurped the executive function by creating citizen prosecutors with far more discretionary power than any other individual authorized to act on behalf of the United States," attorney Robert F. Scoular said in his brief filed on behalf of McDonnell Douglas Helicopter Co.

McDonnell Douglas, as parent company of Hughes Helicopter Co., is defending a suit filed by a former Hughes employee, Roderick A. Stillwell, who claimed to have uncovered up to $175 million in overcharges to the Army on the Apache helicopter. The suit seeks total damages of up to $750 million.

The government tentatively intervened in the case in 1987, but later withdrew, saying it "lacked sufficient evidence to demonstrate it had been injured or damaged." http://articles.latimes.com/keyword/roderick-a-stillwell

Stillwell has pursued the case as a private plaintiff, however, prompting McDonnell Douglas to complain it should not have to defend itself against a private prosecution when the government itself has found insufficient evidence.

Although it is the McDonnell Douglas challenge that will be considered today by U.S. District Judge William D. Keller, Northrop Corp. has similar constitutional challenges on the court calendars in June.

B-2, MX Cases

In those cases, Northrop is accused of overcharging the government on the B-2 bomber and inadequately designing and testing a key component of the MX missile, allegedly rendering the weapon unreliable. The Justice Department has declined to join either lawsuit, though it has intervened in at least one other action against the company, seeking $63 million in damages for allegedly faulty testing on critical guidance components of the cruise missile.

Defense contractors, joined in the challenge by a wide variety of business and industry groups, including the U.S. Chamber of Commerce, argue that it is unfair for qui tam plaintiffs to be able to sue a company on behalf of the government when they may not have suffered any damages themselves--or indeed, where no specific dollar loss to the government can be proved.

"It takes 10 minutes to make an allegation, and 10 months to investigate it before you find out the allegations are often without merit," said Northrop spokesman Tony Cantafio. "There's a big difference between being vigilant and being a vigilante."

But Phillips, co-founder of the now-defunct Center for Law and the Public Interest, and other supporters say that sometimes a private citizen is precisely what is needed to nudge a case along when the Justice Department may have been unable or unwilling to pursue it.

"The truth of the matter is, they haven't done a good job. They've had pretty scant success with even the cases they've brought," he said. "So now they have a new wave of lawyers coming in who are private attorney generals, putting intense pressure on them, and they don't like it."

Reluctant Support

The Justice Department reluctantly supported the legislative amendments to the act in 1986, expressing fears about giving up its prosecutorial authority to private citizens. Some department officials have complained privately since that the act has forced them to waste time and money investigating meritless claims.

But the department has delayed taking a position on the constitutionality issue, prompting the Senate on April 13 to direct its legal counsel to defend the statute in the Los Angeles challenge.

In response to the defense industry's claims that the law is unconstitutional, supporters say the Supreme Court has repeatedly upheld similar \o7 qui tam \f7 and independent prosecutor statutes. For example, Congress over the years has authorized that informants share in fines imposed on slave traders and tax violators. As for the industry's complaints that it encourages suits from disgruntled employees or others without legitimate claims, Phillips claims that the opposite is true.

"Before (the statute), you would tend to get a lot of people who would be less credible, people who for whatever reasons felt they had to go on a mission from God to expose this. A lot of people were paranoid," he said.

"What I find here is the kind of people who come forward are very rational people who have looked at the facts and looked at their potential for recovery based upon those facts, because why bring a case that's going to be a loser?" he said. "You'll find people who are making a cold calculation of how good is my case, and how much do I get if I win?"

30 Years in Industry

Stillwell, the whistle blower in the case to be heard today, said he worked in the aerospace industry for nearly 30 years and saw instances of fraud and mischarges "many, many, many times." But the only time he attempted to report it, he said, Defense Department investigators told him: "You have a pretty legitimate case here, but we really don't know what to do with all that paper work."

Now a Palmdale resident working for another company, Stillwell said he filed the suit in part out of fear that one day the government would learn about the purported fraud and his superiors would point the finger at him. This time, he decided, he'd take the initiative.

"That's the way it always happens," he says, "whoever the guy is on the desk, he becomes the sacrificial lamb. Well, I wasn't about to become a sacrificial lamb

"Hero's, Zealots or Victims ?"


William Schumer once had a life that was stable and blessed with good fortune. The former Hughes Aircraft executive negotiated multibillion-dollar defense contracts, earning $87,000 a year. He lived in a stylish suburban home with his wife, a past Olympic swimmer, and two children.

Then he became a whistle-blower, alleging in a 1989 federal lawsuit that Hughes had cheated the Air Force on the B-2 bomber project. Schumer began a treacherous slide, eventually losing his home, his career, his emotional health and nearly his life.

Earlier this year, Schumer hit bottom when he purchased a gun and threatened to kill himself. He was held by Los Angeles police for 48 hours of psychiatric observation. While in his hospital bed, an attorney called to say his wife was divorcing him.

With his lawsuit virtually dead, Schumer lamented recently, "all I have left is a little bit of dignity and a conviction that I did the morally correct thing. I don't have any money. I don't have any prospects. I am now contemplating homelessness." http://articles.latimes.com/keyword/william-schumer

Schumer says he is a victim of the False Claims Act, the controversial system that is supposed to be the federal government's front line against defense industry fraud.  

The law, which dates back to the Civil War, was virtually moribund until it was amended in 1986 to attract more whistle-blowers like Schumer. It is a bounty-hunter system that allows individuals to sue contractors on behalf of the government and share up to 30% of any recovery.

Since the law was changed, about 590 suits have been filed and $400 million recovered by the government, according to Michael Hertz, director of commercial litigation at the Department of Justice.

However, the law also has drawn criticism from all sides--whistle-blowers, the defense industry, the Pentagon and even some Justice Department attorneys.

For whistle-blowers, although a few have received large rewards, the preponderance have not fared as well. The Justice Department elects to prosecute less than half the lawsuits because they often lack merit. Many others wither away in a legal system that grinds down those who filed them.

And like Schumer, who left Hughes last year on stress leave, many whistle-blowers say the experience has been ruinous--leading to lost careers and marriages, financial devastation, emotional turmoil and alienation from society.

Such problems can befall whistle-blowers whether they turn out to be right or wrong. This fallout can also change normal lives that are consumed by the cases.

To supporters, whistle-blowers are victims who are ostracized by their fellow employees and are easy targets for a politically powerful industry. One vocal advocate, Sen. Charles E. Grassley (R-Iowa), calls them patriots and says they should be decorated by President Clinton in the Rose Garden. The validity of their claims is proven by the $400 million in fraud recoveries, he says.

But to defense industry executives and other critics, the whistle-blowers are zealots and greedy malcontents whose allegations are often based on incomplete knowledge.

Industry executives, including many small contractors, say that whistle-blowers' "frivolous claims" have forced the industry to spend millions of dollars for legal defenses, expenses that are passed on to taxpayers through higher weapons prices.

The Justice Department plays a key role by having the right to intervene and prosecute the charges brought by whistle-blowers, whose moniker derives from sports referees. Though the agency endorses the law, many Justice Department attorneys privately believe that the system is an unconstitutional breach of their jurisdiction.

"You can't have private citizens running around as bounty hunters after corporations," former U.S. Atty. Gen. William Barr said in an interview. "Turning that power over to any Tom, Dick or Harry is a very unfair way to proceed. That's no way to run the government."

Pentagon officials despise the system, as well, saying it destroys business relationships and further diminishes their diluted authority.

Among the few who say the system works are certain legislators and the whistle-blowers' attorneys, some of whom have earned millions of dollars in contingency fees.

Whether patriots or zealots, whistle-blowers in case after case have fallen out of society's mainstream, ending up obsessed with proving their allegations and unable to get their lives moving again.

Many of the two dozen whistle-blowers interviewed for this story said they would not do it again. Cases filed under the False Claims Act usually take years to resolve--the result of legal maneuvers by industry and government, as well as a lack of resources in the Justice Department.

David Peterson, a former Northrop supervisor of 125 engineers, has been waiting six years for a much-distracted Justice Department attorney to bring his fraud allegations to trial. In the meantime, his life has disintegrated. http://articles.latimes.com/1996-05-18/news/mn-5542_1_northrop-grumman

In 1987, Peterson alleged that Northrop had set up a wacky scheme to circumvent Pentagon purchasing regulations on a nuclear missile guidance system. Peterson testified before Congress and appeared on the TV news show "60 Minutes."

But the momentary fame expired and he lost his wife and his $83,500-a-year. He says somebody burned down his house. And an effort to start a gun business failed.

Holed up in a cheap motel in the Nevada desert this year, Peterson said: "Since I left Northrop, I carry an AK-47 and three handguns--a .45, a 9-millimeter and a .38--and a 12-gauge shotgun. Maybe it is a little security blanket. I always have a thousand rounds of ammunition with me."

Peterson said he doubts Northrop executives would attempt to hurt him, explaining his guns as just "something to keep handy. This is just a normal thing for me." Meanwhile, he works full time on his lawsuit, sorting through 40,000 pages of evidence in his motel, linked to the outside world by fax and personal computer.

"If you do this, you have to be prepared to sacrifice everything," he advises other potential whistle-blowers. "You have to be prepared to lose your family and your job. And to be called crazy. It does take a toll."

Experts disagree whether the pressure of fighting big corporations is to blame for the fall of whistle-blowers.

"The first time I meet a whistle-blower I look into their eyes," said Joe Coyne, an attorney who represents Northrop, Honeywell and other contractors. "There is a glint in their eyes and you can tell whether they are crazy or not."

Coyne estimates that defense contractors have spent $100 million since 1986 fighting mostly frivolous allegations. Whistle-blowers break rank precisely because they are disgruntled, he said.

"People who whistle-blow are not the top 10% of performers. They are the bottom 10% of performers. The guy who is on a golden career is happy about that. His home life may be better because of that," Coyne said.

But such harsh judgments come from an industry that has made its own embarrassing admissions. Virtually every big contractor has pleaded guilty to felonies and some former executives are now ex-cons.

"You are fighting $300-an-hour attorneys, a multibillion-dollar corporation and their connections in Congress," said George Pointon, who with John Kolbach alleged in testimony before Congress in 1987 that Lockheed had lost thousands of secret documents concerning the F-117A Stealth fighter. Though the two security officials never filed a lawsuit, Pointon said he was fired in 1990 and Kolbach in 1989.

"It was painful to tell my children that this would screw up their lives, but it was important enough to do," said Pointon, who operates four homes for abused children in Phoenix. "I have landed on my feet, but it separated me from my children and family."

Regardless of whether whistle-blowers are right or wrong--or whether they are emotionally equipped to cope with their crisis--the stresses on them can be enormous.

Jeff Kraul, 42, a production manager who joined David Peterson in suing Northrop for fraud, lives in a windowless warehouse at a secret location in Southern California, partly out of concern for his safety. He declared bankruptcy, lost his wife to divorce, has undergone five years of psychotherapy and doubts that he "will ever be allowed to work for a major corporation."

Roland Gibeault, who charged in a lawsuit that Genisco, a Simi Valley defense electronics firm, had falsified tests on Harm missiles in 1987, worked undercover with federal agents for a year, not even telling his wife about his secret job as an informer. The enormous time commitment and stress created by the case led to his divorce, a pattern in many other cases.

"I was out of my league," said Gibeault, a test technician. "I came from a dairy farm in New Jersey. I had no idea what was going on. They eat people like me for their breakfast. I was heartbroken."

Gibeault's allegations led to a recovery of $525,000. He was supposed to receive $131,000, mostly in 110,000 shares of Genisco stock with restricted sales rights. The stock price plunged and today it is worth less than the income taxes he owes on the award.

Brian Hyatt, a Northrop senior engineer who made national headlines in the mid-1980s when he alleged in testimony before Congress and in a federal lawsuit that the MX missile guidance system was faulty. He says he was fired from Northrop and he lost his lawsuit. He now works as a night security guard.

Grassley, the leading sponsor of the 1986 amendments, acknowledges that whistle-blowers remain vulnerable.

"I would encourage whistle-blowers to come forward, but I would know in the back of my mind that even with the best of intentions the laws don't offer much protection," Grassley said. "Whistle-blowing has to be a merit badge that is proudly worn."

That's a far cry from reality. The aerospace bust has jangled nerves in an already uptight business, fueling fears that more disgruntled workers will file lawsuits.

"It is an industry where people have a very high risk of psychological breakdown," said Bill Spindell, a psychologist who has treated whistle-blowers. "It is an industry characterized by very hard work and very good salaries. But alcohol and substance abuse are endemic in the community. Illicit sexual affairs are more common than average."

Spindell said whistle-blowers are "extremely moral people," but they have an exaggerated sense of their ability to correct wrongdoing--a form of narcissism, adding: "Once you blow the whistle, you are squeezing toothpaste out of the tube and you will never put it back in again."

Ironically, some small contractors are in the same boat as whistle-blowers, alienated and financially devastated. Fred Clark virtually shut down his Orlando Helicopter Co. in Florida after an employee's fraud suit triggered an aggressive three-year probe into whether Clark violated contract specifications--though the Army said the aircraft were fine.

The legal defense cost Clark $150,000, but more important, diverted his attention from business. The government, without apology, dropped the matter in May, 1992. The suit withered away, as well. But by then, the company, which Clark founded, was down to two employees from 40.

"The investigators should have been able to see through this whistle-blower very quickly," Clark said. "There is no fairness."

Prime contractors have the same complaints, but also have the resources for top legal talent and lengthy legal campaigns.

Sam Iacobellis, Rockwell International executive vice president, said the industry takes fraud allegations very seriously, but would rather deal with them by taking its own strong actions.

"That is the alternative to some whistle-blower lining his own pockets at the expense of somebody else," he said. "How often do these people see something they don't understand? It happens quite often. Some of these guys can barely write. It has not done anything to help the health of the industry."

Many Pentagon officials share that contempt.

"As a citizen, I feel this system stinks," said John Welch Jr., recently retired assistant Air Force secretary. "It is bounty-hunting. It creates a whole other loop of operation. It belies any trust in the system."

But Phillip Benson, a whistle-blower attorney, said that most cases are filed only after individuals have exhausted efforts to get management's attention. Benson has charged that the Pentagon is in cahoots with industry, accepting fraud to politically shelter weapons programs.

Indeed, Congress amended the law in 1986 because it believed that the Pentagon and Justice Department were slow to correct waste, fraud and abuse, Grassley said.

John Phillips, a Washington attorney who helped write the 1986 amendments, insists that the system is working well now. His firm, Hall & Phillips, has recovered $217 million, more than the Justice Department in recent years, he said.

One of Phillips' clients, Chester Walsh, received a record $11.5-million share of a $69-million settlement last year, stemming from his allegations that General Electric was involved in bribing an Israeli general.

Many Justice attorneys hate the whistle-blower law. Former Atty. Gen. Barr believes Congress encroached on the executive branch when it empowered private attorneys to represent whistle-blowers and sue on behalf of the government. A 1989 memo by Barr, asserting the law to be unconstitutional, has become part of an industry legal challenge.

Although Atty. Gen. Janet Reno endorses the False Claims Act, many Justice attorneys side with Barr. For one thing, many government attorneys deeply resent the multimillion-dollar fees won by private lawyers in the same types of cases they prosecute.

Justice officials have sought to low-ball whistle-blowers, according to one government attorney who asked not to be identified. Based on figures supplied by the department in March, $42 million was paid out to whistle-blowers out of recoveries of $358 million since 1986. That amounts to about 12%, less than the 15% minimum specified by law.

In addition, the Justice Department's 55 attorneys in Washington assigned to False Claims cases are too bureaucratic and have scant courtroom experience, he said. Whistle-blowers have long contended that the Justice Department is weak on prosecution.

Hertz said the Justice Department is serious about defense fraud and is attempting to carry out the will of Congress. The payout ratio appears low because settlements have occurred faster than payouts; and the ratio has risen recently to 15%, he said.

"Overall, the Justice Department would say the mechanism is a good idea," Hertz said. But he declined comment on his personal view of the system's constitutionality or merit.

Justice Department critics say the agency cannot be trusted to prosecute cases that jeopardize important weapons programs and that may interfere with civil servants' plans to get industry jobs. The government often cannot protect its own internal whistle-blowers.

"Whistle-blowers commit the cardinal sin in the defense industry: telling an embarrassing truth," said Ernest Fitzgerald, the dean of whistle-blowers who first told Congress of Lockheed's $2-billion overrun on the C-5A program in 1968.

Fitzgerald was fired from his Air Force job as a financial analyst. The Watergate tapes later revealed that then-President Richard Nixon had ordered his subordinates to "Get rid of that son of a bitch." Fitzgerald sued Nixon and settled for $142,000 in 1980. Congress then forced the Air Force to rehire him.

Fitzgerald came out a legendary hero, but many others have been left only with grief. Schumer's case was thrown out by a federal judge in Los Angeles, a decision he has appealed. Although he has a law degree, Schumer, now 59, has been unable to restart his career because of severe depression.

"Even if you do get money out of it, it's not worth it," said the former Hughes Aircraft executive. "How much money could compensate you for the loss of your career, your wife, your family and your home?"

Please keep in mind when reading this material that Geniso and Texas Instruments made the Altimiter Transducer that went into the Guidance and control section of the HARM missile and the Goodearl / Alred case was about the electronic chips that were integrated in the same way of the HARM missile both guiding the missile to its target during the same time frame regarding the Genisco fraud. The chips that Goodearl and Alred were working on handed-off  the Aircraft information to the onboard computer in the HARM and other missiles as well a pre-brief  to the missile from the onboard avionics in the aircraft before missile launch. 

Goodearl and Aldred Versus Hughes Aircraft: A Whistle-Blowing Case Study

The Link Below is  a case study conducted by the Florida State University, the Margaret Goodearl / Ruth Aldred v Hugh's Aircraft case began in 1985 and ended in 1995  with a victory for the two women who blew the whistle on Hugh's Aircraft and they are true Patriot whistleblowers. 


Kevin W. Bowyer

Department of Computer Science and Engineering University of South Florida
Tampa, Florida 33620-5399


Abstract – Whistle-blowing is a core topic for any ”ethics” or ”professionalism” course offered for IS/CS/CE/EE ma- jors. This paper documents a real whistle-blowing case that is ideal for use in teaching. The incident is set in the com- puting industry, specifically in the supply of micro-electronic chips for use in safety-critical systems. The incident is well documented, with decisions in both a criminal case and a civil case. It touches on all the major issues involved in whistle-blowing.

1. Introduction

The term “whistle blowing” may not already be famil- iar to students in IS/CS/SE/EE. One author defined whistle blowers as “those who ... make revelations meant to call attention to negligence, abuses or dangers that threaten the public interest. They sound an alarm based on their expertise or inside knowledge, often from within the very organization in which they work ... Most [whistle blowers] know that their alarms pose a threat to anyone who benefits from the ongo- ing practice and that their own careers and livelihood may be at risk” [5]. Examples of situations that lead to whistle blowing are when an employee discovers that their company is knowingly supplying an unsafe product to customers, or when someone discovers that tax dollars are being wasted in some fraudulent or flagrant manner. The case discussed here actually combines both of these types of concerns.

Whistle-blowing is mentioned in all the major codes of ethics relevant to the computing profession. For example, the first item in the IEEE code (see chapter 3 of [6], also www.ieee.org) says that members agree to:

Accept responsibility in making engineering deci- sions consistent with the safety, health, and wel- fare of the public, and disclose promptly factors that might endanger the public or the environment.

The explanation of item 1.2 of the ACM code (see appendix 2 of [6]), “Avoid Harm to Others,” amplifies on this theme:

In the work environment the computing profes- sional has the additional obligation to report any signs of systems dangers that might result in seri- ous personal or social damage. If one’s superiors do not act to curtail or mitigate such dangers, it may be necessary to “blow the whistle” to help correct the problems or reduce the risk.

The AITP Standards of Conduct (see chapter 3 of [6], also www.aitp.org) includes the statement that members will:

Never misrepresent or withhold information that is germane to a problem or situation of public con- cern nor will I allow any such known information to remain unchallenged.


Genisco Must Pay $725,000 for Fake Military Test Data
November 08, 1988|KIM MURPHY | Times Staff Writer

Genisco Technology Corp. was ordered Monday to pay $725,000 in fines and restitution for falsifying test data on several key military components, including a U.S. Navy torpedo simulator.

Under the settlement, $131,250 will go to a former Genisco engineer who lost his job after he reported the fraud in what is believed to be the first private settlement ever paid under the 2-year-old federal whistle-blower statute.

Genisco, a Rancho Dominguez aerospace company, pleaded guilty last month to charges that it falsely certified test results for small but critical components, known as pressure transducers, which the company supplied for a variety of military guidance systems.

HARM Missile Involved

The parts covered in the guilty plea were supplied to the Navy's mobile underwater target device and a Navy torpedo simulator. But the original indictment also charged the company with falsely certifying transducers for the HARM missile, an allegation that prosecutors said forced several of the missiles to be recalled from strategic locations around the world.

Much of the government's case against the company was developed with information supplied by four Genisco employees, one of whom filed a federal whistle-blower lawsuit on behalf of the government and who will now receive a share of the settlement proceeds as a result, said Assistant U.S. Atty. David Katz, who prosecuted the case.

The employee, Roland Gibeault, was the first employee who still worked for Genisco to meet with investigators for the FBI and the Defense Criminal Investigative Service, Katz said.

Gibeault was laid off from his job two days after the government disclosed Gibeault's identity to Genisco, as was required because of the criminal indictment subsequently returned against the company.

"I'm not saying there was a connection," Katz said. "Genisco has said there was no connection. But that's certainly curious timing, that two days after they've realized just how devastating the evidence that was coming in from Gibeault was, he gets laid off."

The settlement calls for Gibeault to receive 25% of the $525,000 in restitution the company agreed to pay as settlement of all criminal charges and civil claims. The company also agreed to pay $200,000 in fines for its guilty plea to four criminal counts.

Cheaper Than a Trial

Meeting with reporters after the sentencing hearing before U.S. District Judge A. Andrew Hauk, company president Phillip Friedman said Genisco agreed to plead guilty and pay the settlement because it would be cheaper than taking the case to trial.

"I remain convinced that we were not guilty in this case," Friedman said. "I'm convinced that none of our executive officers knew about the situation. It was solely the activities of two or three ex-affiliates in a division that was 60 miles away from headquarters. We settled the matter to get it behind us and to allow the company to move forward."

But Katz criticized the assertions that Genisco is innocent.

"I think it's outrageous to imply that the corporation wasn't guilty when Genisco's own attorneys got up at the hearing on the (guilty) plea and said that they concurred with the factual basis presented by the government and agreed that Genisco should plead guilty because it was guilty," the prosecutor said. "A federal court won't accept a guilty plea from someone who says they are not guilty."

Gibeault's attorney, Robert Kilborne, called the settlement "a major victory," although his law firm was forced to waive its fees to negotiate the payment.

"I think . . . it shows the rest of the whistle-blowers across the country that there is an answer in the whistle-blower statute," he said.

The three employees--Werner Brinkschulte, Danny K. Evans and Robert L. Kersnick--who were also charged in the indictment with carrying out the test falsifications have all been fired, Friedman said. All three have pleaded guilty to making false statements and conspiracy and are scheduled for sentencing Nov. 21.

Navy Accused of Trying to Misleading Congress About HARM Missile Failures


The chairman of a congressional oversight subcommittee has accused the Navy of attempting to mislead Congress about performance failures in the HARM missile, the state-of-the-art anti-radar weapon deployed in the U.S. raid against Libya in 1986.

U.S. Rep. John D. Dingell (D-Mich.), chairman of the House Committee on Energy and Commerce and its investigations subcommittee, in a letter made public Tuesday, said Navy officials have refused to provide data on whether any of the missiles missed their targets because of falsified test certifications on a key component in the missile's guidance system.

Committee sources said there is evidence that up to 25% of the HARM missiles deployed on the initial Libyan bombing raid missed their targets, and congressional investigators have uncovered several other incidents, which Dingell said raise "serious questions" about the effectiveness of the weapon system.

"On several occasions, Navy Department officials have attempted to mislead the subcommittee about their knowledge of the performance of the HARM, particularly in the case of the bombing raid on Libya in April, 1986," Dingell said in a letter to a Los Angeles federal judge who is handling a criminal case stemming from the false certifications.

Genisco Technology Corp., an aerospace company based in Rancho Dominguez near Carson, which supplied a small but critical component on the missile system known as the pressure transducer, pleaded guilty, along with three of its managers, to charges of falsifying test data to make it appear that the transducers met design specifications when they had in fact not been tested.

Failure of the transducers, which are altitude sensing devices, could cause the missiles to miss their targets, federal officials said.

The charges prompted Navy officials to recall the High-Speed Anti-Radar Missile from strategic locations around the world, and Genisco last week agreed to pay $725,000 in fines and restitution. The three Genisco employees are awaiting sentencing.

Texas Instruments, prime contractor on the HARM missile, said transducers in about 100 missiles had to be replaced.

Committee sources said congressional investigators sought detailed data on the performance of the missile after the Libyan bombing raid but were told that individual pilot debriefings had been destroyed.

Later, subcommittee officials were provided with a classified after-action report, which did indicate "some problems" with the performance of the missile, which Pentagon officials have publicly credited with superior performance in the 1986 raid, the sources said.

"Even against defenses which were well below optimum, serious questions about the HARM's effectiveness persist," Dingell said in his letter to U.S. District Judge A. Andrew Hauk.

He added that Navy officials have "refused to cooperate" with the subcommittee to determine to what extent those problems may have been caused by faulty Genisco transducers.

"We have found that the Navy, and indeed all the uniformed services, seem to feel more of an obligation to protect their programs, their budgets and their favored contractors than to protect the interests of the troops or the taxpayers," Dingell wrote.

A Navy spokeswoman said late Tuesday that she had not seen the letter and could not comment on it.

"This is all new information to me, but we'll look into it," Lt. Barbara Kent said.

Assistant U.S. Atty. David Katz, who headed the Genisco investigation, said investigators for the Navy and the Defense Criminal Investigative Service, an arm of the Pentagon, were fully cooperative with federal prosecutors.

"Our experience in this case with the military and the military investigators has been good and positive, so I imagine what the subcommittee's saying here, obviously, (that) they're speaking for themselves," Katz said.

Katz refused to discuss what federal prosecutors have learned about performance failures in the HARM missile that may be attributable to the Genisco transducers. That information, he said, will be disclosed in a sentencing memorandum to be filed with the court within the next 

John Gravitt and Roland Gibeault interviewed together by Tony Capuccio Defense Week a Belt-Way Insider  D.C. magazine for the Pentagon and the U.S. House of Representatives and Defense Contractors.  Gibeault won his case against Genisco Technology Corporation a year before Gravitt won his case against G.E. The Gravitt case was for over-charging but the Gibeault was of a very serious nature which had a large impact on a critical first line of defense weapon for the U.S. Navy and Air Force the HARM missile which disables or destroys their enemies eyes and ears, their radar. The HARM missile is the first weapon to be used in almost all conflicts or confrontations to renders their enemies blind by destroying their radar.


Defense Week Article on 5/1/1989 regarding the extreme seriousness of the Genisco Technology Fraud and the effect it would have on the HARM missiles performance because of bad altimeters that guides the missile to its target (Radar Installation).