A U.S. grand jury in Maryland yesterday indicted Fairchild Industries Inc., an aircraft manufacturer that holds that largest defense contract in Maryland, on charges of filing false income tax returns in connection with money allegedly funneled to a political campaign slush fund in the early 1970s.
Corporate executives allegedly reimbursed the corporation for a substantial portion of the cost of cars issued to them, and that money went into a fund for political contributions controlled by Fairchild chairman Edward G. Uhl, according to the indictment.
The indictment, handed down after a three-month investigation by the office of the U.S. attorney in Baltimore, did not specify who allegedly got contributions from the political fund.
In a separate civil action seeking $39 million in back taxes and penalties, the Internal Revenue Services-contends that a loss reported on he company's lease of aircraft to the Republican National Party and to the Nixon-Agnew Campaign Committee in 1968 was a nondeductible political contribution. The IRS, in documents filed in U.S. Tax Court in Washington, also asserted that no deduction can be taken for a $10,000 advertisement placed by the corporation in the Republican National Convention program in 1972.
Fairchild, headquartered in Germantown, has contested both IRS assertions along with most of the back taxes and all of the penalties the agency says it owes, according to documents filed in the civil case.
Yesterday's indictment charged that the tax violations occured in 1971 and 1972 when the corporation included the full cost of the corporate cost on its tax returns and took depreciation deductions based on these figures. Fairchild did not account for reimbursements by the corporate executives, the indictment charges.
The IRS, in its civil action, maintains that Fairchild failed to report as income payments made by employes for the use of automobiles, and the IRS computed the money involved as $22,500 per year.
Although the indictment did not say hos large the alleged political slush funds were, a Fairchild spokesman said the indictment alleges false statements involving $20,000 on its 1971 and 1972 income tax returns.
The fund allegedly was controlled by Uhl, who lives in Hagerstown, Md., and was then Fairchild's president, Uhl was indicted yesterday on a charge of aiding and assisting in the filing of two false tax returns.
A corporate spokesman said yesterday all the charges are "without merit and . . . will be vigorously defended." The spokesman said the indictment relates to a practice of maintaing a political fund "which the corporation voluntarily disclosed to the Securities and Exchange Commission in 1976 and which had been voluntarily terminated three years before that." He refused to elaborate.
In 1976, about 80 large corporations either voluntarily or at SEC prompting disclosed that they made questionable payments to U.S. political campaigns or foreign government officials, according to SEC chairman Roderick Hills. Fairchild, at the time, said its questionable activities occurred between 1970 and 1975 and "were isolated and remote in time," but gave no further details.
The company spokesman said "it is fundamentally wrong" for the government to permit one agency, such as the SEC, to ask public companies to conduct their own voluntary investigations and then have other government agencies like the IRS or Department of Justice take that information "and use it to frame criminal charges."
Fairchild, which is producing the A-10 attack aircraft for the Air Force, won the contract to design and flight-test two prototype A-10s in 1970, according to a report filed by Fairchild with the SEC.