Two prosecution witnesses testified yesterday that three former Navy officers charged with illegally inducing the Iranian government to sign a contract with a private company had not tried to conceal the plan from the U.S. Navy.
On Tuesday, Charles N. Goodale, a former training specialist with Lulejian and Associates Inc., the company allegedly involved in the scheme, had testified for the prosecution that he had been asked by one of the defendants, Malcolm W. Cagle, to keep the plan from Harry E. Gerhard, director of the security assistance program for the U.S. Navy who would have to approve any such contract.
But yesterday Capt. Lawrence D. Caney, who was serving at the time of the negotiations as head of the tactical assistance program in Iran, said the proposal to try persuade the Iranian government to accept a "sole source contract" for the work had not been kept from him in discussions with two of the defendants, Cagle and James N. Hooper.
Caney testified in U.S. District Court in Alexandria that "the whole thrust of the conversation (between him and two of the defendants) was that the training program would shift from a Navy-to-Navy effort to a contractor-to-contractor" arrangement.
Caney added that he had mentioned this to Gerhard, who has been pictured by the prosecution as being admantly opposed to "sole source contracts," and that Gerhard had indicated he knew about the plan.
A "sole source contract" is one in which a U.S. government agency, such as the Navy, agrees to do business with a foreign government by contracting with a private U.S. firm without advertising or competitive bids.
The contract in question was a $1.2 million pact to train 2,000 Iranian officers and enlisted men in the use of two destroyers that had been sold to Iran by the U.S. Navy in 1974. The contract was canceled by the Iranian government after it found out about the alleged scheme, according to U.S. Attorney James Hubbard. The Iranians then contracted directly with the U.S. Navy for the work.
The three defendants indicted on charges of conspiring to defraud the U.S. government and then concealing the scheme are Cagle, of Lynchburg, Va., a retired vice admiral who is a former chief of training and education for the Navy; Hooper, of Pensacola, Fla., a retired Navy captain and Cagle's deputy, and Dominic A. Paolucci of Alexandria, a retired Navy captain and former president of Lulejian.
A second government witness, Gen. Paul C. Boyd, who was stationed in Iran at the time of the discussions in the summer of 1974, said he had forwarded all the information he had received from Cagle about Lulejian to Gerhard.
Goodale took the stand for the second day yesterday and said under cross-examination that his company had urged Cagle and Hooper to push his company's interests when they met with the chief of the Imperial Iranian Navy in Teheran in July, 1974.
The prosecution has charged that in return for Cagle's and Hooper's aid to Lulejian in obtaining the contract the two men were offered jobs at the company upon their retirement from the Navy in August, 1974, by Paolucci, president of Lulejian.
Cagle was employed at Lelejian as a $200-a-day consultant from Sept. 20, 1974, to Dec. 24, 1974. Hooper, who retired from the Navy on the same day as Cagle, became general manager of Lulejian from Sept. 30, 1974, to Jan. 1, 1975.