A federal prosecutor, opening the trial of Computer Sciences Corp. and four individuals on charges of defrauding the General Services Administration, yesterday told a jury that GSA was billed 50 percent more for a computer service after being told falsely the service had been improved.
Attorneys for the defendants withheld response to the government statement, made at U.S. District Court in Alexandria. But the four individuals and CSC have denied wrongdoing. CSC is a California-based computer and communications concern that employs 5,000 people in the Virginia-Maryland region and has 20 offices in the metropolitan area.
The trial grew out of a 57-count indictment returned against the company and six individuals in 1980 alleging fraud and racketeering in CSC contracts with GSA valued at $100 million.
In 1981, the charges were thrown out by a federal judge who cited grand jury mistakes. Last year, the 4th U.S. Circuit Court of Appeals in Richmond reversed that decision, allowing prosecutors to reinstate the charges. However, some of the original 57 counts were dropped.
Prosecutors have now broken the charges into three separate indictments. In the trial of the first, which began yesterday, the government is alleging seven counts of mail fraud and false claims of money from GSA. The other two indictments include charges of racketeering, false claims and conspiracy.
The individuals on trial yesterday were John W. Luke, a CSC executive now on administrative leave; Erwin L. Allen, a former CSC employe who is now a private consultant; Herbert G. Blecker, head of the Icarus Corp. of Maryland, which worked with CSC on the GSA contract; and Peter C. Loux, who left CSC to join Icarus.
Standing before a bank of complex charts and graphs, Department of Justice senior counsel William S. Lynch told the jury that in 1972 CSC contracted with GSA to provide a computer service known as "COST," which was used by the Energy Research and Development Administration to analyze production of alternative fuels.
According to Lynch, rights to COST's software were owned by Icarus, which "quarreled" with CSC in 1974 over what share of the service's income should go to Icarus.
To satisfy Icarus' demands and raise CSC's income as well, Lynch said that COST was repackaged as a new service called Budget Planning System. "The only thing different--a higher price," Lynch said. GSA was billed 50 percent more for the same service under a different name, he said.
Attorneys for the defendants said they are withholding their opening statements until after the prosecution has finished presenting its case.
In a statement published in CSC's in-house newspaper, company president and chairman William R. Hoover said that "we believe we and our employes will be found innocent of any wrongdoing. In essence, what we are dealing with here is a contract dispute." CSC suggested that the dispute would be more properly settled in civil court.