General Electric Co., the nation's 10th largest corporation, was indicted by a federal grand jury in Philadelphia yesterday for criminal fraud in billing the government for work on a warhead system for ocean-spanning nuclear missiles.
The indictment is the latest in a series of recent actions against defense contractors at a time when the Pentagon is trying to defend its expanding budget against charges of waste and mismanagement. In no other recent case has a firm been indicted, however. GE's $4.5 billion in Pentagon contracts in fiscal 1983 ranked it fourth among the nation's defense contractors.
Besides missile warheads, GE's military products include nuclear reactors for Navy submarines, engines for Air Force planes and transmissions for Army tanks.
U.S. Attorney Edward S.G. Dennis said GE faces a maximum $1,080,000 fine if convicted of "making false statements to an agency of the United States" government regarding the way it billed the Air Force for replacing older warheads on the Minuteman intercontinental ballistic missiles with the updated Mark 12A.
The indictment charges GE with four counts of making false claims and 104 counts of making false statements to the government.
From 1980 to 1983, according to the indictment, GE fraudulently billed the government for $800,000 by changing employe timecards at the company's Reentry Systems Division without employes' knowledge. The division is in Philadelphia and suburban King of Prussia.
According to the indictment, GE had employes submit blank timecards to be completed by managers so that Mk 12A work, not reimbursable, could be charged to other contracts that the government would pay.
Roy Baessler, 40, of Topsfield, Mass., a former GE unit manager, and Joseph Calabria, 50, a chief engineer, were granted immunity by the Justice Department but made false grand jury statements about Mk 12A accounting practices, authorities said.
Baessler and Calabria, they said, have each been charged with two counts of "making false declarations" before the grand jury and, if convicted, face penalties of as many as 10 years in jail and $20,000 in fines.
Dennis said the indictment "does not allege, and there is no evidence to suggest, that there are any defects in the actual work performed by GE on the contracts."
The Mk 12A warhead is the backbone of the land-based U.S. nuclear force and is designed to deter the Soviet Union from launching a surprise strike.
The reentry vehicle carries three nuclear warheads and arming and fuzing systems that determine when and where the weapons explode. The GE contract included test equipment and computer software designed to make sure the warheads were ready for launch.
The charges came after a two-year investigation by the Federal Bureau of Investigation, the Defense Contract Audit Agency and the Air Force.
GE said the indictment stemmed from a bookkeeping dispute and stressed that there was no charge that the company overpriced products or engaged in criminal activity.
Larry Vaber, a GE spokesman in Westport, Conn., said the government alleges "incorrect charges of about 100 employes' timecards of approximately 100,000 timecards submitted between March and November of 1980."
"We understand that there is no allegation of charges for services or products not received by the government, nor for excessive pricing. Rather, the matter involves complex contractual and accounting procedures. GE has fully cooperated with the government . . . .