Comptroller General Reports to Congress on Audits of Defense Contracts

U.S. GENERAL ACCOUNTING OFFICE-Continued

SCHEDULE I.-Summary of cases reported to the Congress and the Department of Justice disclosing excessive prices negotiated or costs erroneously
claimed and paid under Government contracts and status of Department of Justice action thereon, period July 1, 1958-Dec. 31, 1964-Con.

Remainder

Status of Department of Justice action

$556, 000

After a full review it was determined by
the Department of Justice that a fraud
was not perpetrated on the Government
and the Army was authorized to nego-
tiate an administrative settlement.
208, 000 As a result of conferences with company
officials, an offer has been submitted.
The Department of Justice received
GAO's recommendation on Apr. 6, 1965,
and is now processing this offer.

327,000 The Department of Justice requested by
letter of Dec. 8, 1964, that the Air Force
furnish a full report and its comments on
any irregularities in the performance of
the contract. This information was re-
ceived on Mar. 11, 1965, and is being
reviewed.

(1)

The Department of Justice advised Clevite
Corp. of intention to enter a fraud suit
for recovery of $4,419,500 plus damages,
penalties, and forfeitures. A compromise
settlement of $2,800,000 was accepted by
the Department of Justice.
Air Force has furnished data to support a
claim of mutual mistake in pricing and
this claim was forwarded to the U.S.
attorney for the eastern district of New
York for suit on Mar. 25, 1965.

132,000 Suit has been instituted against the cor-
poration in the U.S. District Court for
the Southern District of New York
alleging violations of the False Claims
Act. The U.S. attorney is presently
engaged in pretrial discovery.

Clevite Corp., Brush Electronics Co. Division, Cleveland, Ohio.

B-132922 July 1959.

Navy.

4,419,000

$2,800, 0000 1,619,000

81,000

Conferences were held with GAO auditors
to elicit more detailed information. The
file is being reviewed again with particu-
lar reference to the additional information
to determine whether there is a cause of
action for fraud or for restitution of exces-
sive payments.

1,084, 000 GAO is in the process of replying to the
Department of Justice request of Mar.
26, 1965, to furnish comments on Depart-
ment of the Air Force memorandum of
Mar. 18, 1965.

143,000 A detailed inquiry was directed to the
Army. The data received from GAO
and Army is being studied to determine
whether there is a probable cause of
action.

156,000

The Department of Justice has obtained
further reports from both the Army and
GAO together with copies of the contract,
the repair contract, interview reports,
inspection reports, related correspond-
ence interview sheets, specifications, and
drawings. The reports and data are
being studied.

242,000 The Department of Justice has concluded
that suit could not be based on the terms
of the contract, and that the facts will not
support a quasi-contract theory of the

149, 000 The Department of Justice made a claim upon Kearfott Co., Inc., in the amount of $507,721.45. Kearfott offered to settle the claim by payment of $350,000 and this offer was accepted by the Department of Justice. 56,000 A collection suit to recover indebtedness of $89,639.64 was instituted in the U.S. District Court, Southern District of California. A compromise settlement of $33,368 was accepted and the action dismissed with prejudice. 303,000 Negotiations with representative of Systron-Donner to explore the prospect of settlement were unsuccessful. Suit against Systron-Donner was filed under the False Claims Act in the U.S. District Court for the Northern District of California.

U.S. GENERAL ACCOUNTING OFFICE-Continued

SCHEDULE I.-Summary of cases reported to the Congress and the Department of Justice disclosing excessive prices negotiated or costs erroneously claimed and paid under Government contracts and status of Department of Justice action thereon, period July 1, 1958-Dec. 31, 1964-Con.

[graphic][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed][subsumed]

43,000

125,000

Suit has been filed in the U.S. District
Court for the Southern District of New
York under the False Claims Act and
alternatively for breach of contract. The
case was tried in March 1965 before a
court without a jury and a decision has
not yet been rendered.

Suit was filed in the U.S. District Court
for the District of Minnesota in Sep-
tember 1963 under the False Claims Act.
There have been extensive pretrial dis-
covery proceedings. The case is on the
court's current trial calendar.

The Department of Justice accepted an
offer in compromise in the amount of
$327,300 submitted by Philco Corp. In
accepting this offer, it was specified that
acceptance did not prejudice or affect
negotiations between Philco and the
Department of the Navy as to any facet
of the contract other than the alleged
inclusion by Philco in the proposed costs
for that contract the estimated cost of
items which Philco had previously agreed
with the Navy would not be furnished.
The Department of Justice held discussions
with representatives of RCA and ac-
cepted an offer in compromise in the
amount of $258.000 as settlement of any
claims arising from the allegations con-
tained in the GAO report. The accept-
ance did not prejudice or affect negotia-
tions between RCA and the Air Force as
to any facet of the Air Force contract
other than the alleged withhclding of
pertinent cost information during con-
tract negotiations which was the subject
of the GAO report.
The Navy has been requested to furnish a
report which has not yet been received.
183,000 The Department of Justice, after con-
sideration of information obtained in the
case, concluded that under the circum-
stances of the settlement by the Depart-
ment of the Air Force the likelihood of
success in a civil action against the con-
tractor for fraud was negligible. Accord-
ingly, the Department of Justice closed
its civil file in this matter.

215,000

U.S. GENERAL ACCOUNTING OFFICE-Continued

SCHEDULE I.-Summary of cases reported to the Congress and the Department of Justice disclosing excessive prices negotiated or costs erroneously claimed and paid under Government contracts and status of Department of Justice action thereon, period July 1, 1958-Dec. 31, 1964-Con.

The Department of Justice requested
comments from GAO on a report from
the Air Force. Comments on the Air
Force report were forwarded to the
Department of Justice on Apr. 19, 1965.
The Department of Justice solicited the
comments of the Defense Department.
A conference was held with representa-
tives of the Department of Defense and
a request was made for copies of certain
additional documents.

The General Accounting Office has been
advised by the Department of Justice
that an offer in compromise was tendered
by Westinghouse Electric Corp. on Apr.
22, 1965, in the amount of $1,025,000.
Extensive reports have been received by
the Department of Justice from the
respective Departments and conferences
have been held with agency and com-
pany representatives. Some additional
investigation has been necessary and
undertaken. Conferences have been
held with counsel for the subject and
additional materials submitted. These
matters are currently being analyzed and
evaluated by the Department of Justice,

Westinghouse Electric Corp.,
Lima, Ohio.

B-146845

March 1964.

Air Force.

190,000

Books

Comptroller General Reports to Congress on Audits of Defense ..., Part 1