BALTIMORE, SEPT. 12 -- A Columbia defense contractor admitted in federal court today that it filed more than $120,000 in false work claims, much of it to cover cost overruns on highly secret work done for the National Security Agency at Fort Meade.
Systems Engineering & Development Corp. pleaded guilty to one count of filing a false claim for $11,783 in December 1986 but acknowledged a broader pattern of mischarges and phony claims from July 1985 to February 1987.
U.S. District Judge John R. Hargrove fined the company $123,785, the total amount of mischarges.
Maryland U.S. Attorney Breckinridge L. Willcox said the case marks the first successful prosecution of a private contractor engaged in predominantly classified defense work.
He said it should send a message to contractors involved in classified military contracts that they cannot expect to escape prosecution "because of the security implications of a public trial."
Willcox, citing security requirements, said only that the company performed advanced research and development work "of a highly classified nature involving information technology and signal processing" for the Defense Department and other agencies.
NSA spokeswoman Cynthia Berecek confirmed that the work was done for NSA, an extremely secretive intelligence agency assigned to protect U.S. military communications and computer systems and intercept foreign intelligence transmissions.
The company had a series of NSA contracts in 1985 and 1986 with code names such as Bionic, Coherent and Crossbow III. Some were fixed-price contracts, others cost-plus.
According to Willcox, when the company encountered cost overruns on a fixed-price contract, it transferred the overruns to a cost-plus contract to prevent income loss.
The company was acquired recently by Essex Corp., another defense contractor, and is now under new management. Company attorneys Peter Gunst and Andrew Levy said today that the mischarges were made under the previous management and that stricter office controls have since been implemented.
Defense Criminal Investigative Service Agent Mark W. Spaulding said investigators learned of the illegal company activity through a Defense Department hot line tip from a company employee.