General Electric Co. and two of its former executives were indicted by a federal grand jury in Newark yesterday for paying a $1.25 million bribe to a Puerto Rican official for help in obtaining a $92.75 million power plant contract in the mid-1970s.
The case is only the second of the Justice Department's multinational, fraud investigations to include corporate executives in an indictment. McDonnell Douglas Corp. officials were charged in another bribe case last fall.
The indictment was held up by an unusual last-minute attempt by an attorney for defendant Charles Mothon to enjoin the grand jury from voting on the cahrges until additional witnesses were heard. The effort failed, and the indictment was returned in late afternoon, just before the five-year statute of limitations expired on one of the transactions.
A General Electric spokesman said yesterday that the company's auditors discovered the alleged bribe attempt five years ago and promptly reported it to authorities in the United States and Puerto Rico.
"We did uncover it, we did report it; we have been cooperating (with the authorities) for the past five years," said GE spokesman Larry Vaber.
Named in the seven-count fraud and conspiracy indictment were GE; Twombly Inc. of New Jersey; Schenectady Turbine Services Ltd. of New York; Hoyt P. Steele, who was vice president and general manager of GE's international sales division; Robert F. Naples, international sales manager for the company's gas turbine products division; and Mothon, and executive of a GE subcontractor.
According to the indictment, the defendants agreed during 1973 that it would be necessary to pay an official of the Puerto Rico Water Resources Authority to secure the contract on the proposed power plant. Carlos Velazquez Toro, chief of operations for the water authority, is named in the indictment as the recipient of the bribe. He is dead, the Justice Department said yesterday.
To generate the money for the pay off, the GE officials arranged to have a subcontractor, Twombly Inc., be paid inflated prices for equipment normally purchased by the corporation, the indictment charged. Twombly then arranged to have the bribe money wired or mailed to Toro in Puerto Rico, the charges said.
In return, Toro would pass GE confidential information about the proposed power plant contact -- called the STAG project at Aguirre -- through Mothon. "This confidential information and other assistance provided by Carlos Valazquez Toro gave the defendant GE a competitive advantage over other companies competing for the STAG project," the indictment said.
GE received the contract in March 1974.
Three specific payments are outlined in the charges. The first alleged payment is a $94,441 wire transfer from a New Jersey bank to the Bank of Nova Scotia in New York on Sept 5, 1975 -- exactly five years ago. A $70,831 wire transfer using the same banks was completed on Dec. 15, 1975, the indictment said. And a check for $212,490 was mailed from New Jersey to a Mothon company in Bermuda on June 27, 1976, it said.
The defendants are charged with violating the Travel Act on each of the three fraud counts. They also are charged with conspiracy to defraud the citizens of the Commonwealth of Puerto Rico of Toro's faithful services.
Each count is punishable by five years in prison and a $10,000 fine.
The investigation was conducted by the multinational fraud branch at Justice and the multinational currency group of the U.S Customs Service.
In his unsuccessful effort to block the grand jury indictment, Matthew Boyland, Mothon's attorney, argued that any of the alleged bribery transactions took place more than five years ago. But the indictment alleges specific payments within the statute of limitations.