A House subcommittee plans to unveil evidence this week that Pratt & Whitney Aircraft Group improperly billed the Pentagon for such expenses as lavish parties, fishing and golfing trips for Air Force officers, luxury cars for executives and a donation to a general's favorite art museum, according to congressional sources.
A major focus of the panel's hearing Tuesday will be the FBI's contention that its parent agency, the Justice Department, dragged its feet during a 2 1/2-year investigation of Pratt & Whitney and that sufficient evidence exists to bring charges against the company.
A spokesman for Pratt & Whitney called the panel's probe "a rehash of unfounded allegations" and said the company has corrected any questionable billings.
The Energy and Commerce subcommittee on oversight and investigation, headed by Rep. John D. Dingell (D-Mich.), plans to use the Pratt & Whitney case to demonstrate that improper overhead billings are a problem throughout the defense industry. Similar disclosures last month by the Dingell subcommittee, one of the most aggressive and well-publicized on Capitol Hill, prompted the Pentagon to recover $244 million in improper charges from the nation's largest defense contractor, General Dynamics Corp.
The panel has subpoenaed special agent James Cavanaugh, who is heading the Federal Bureau of Investigation probe of billings by a Pratt & Whitney plant in West Palm Beach, Fla., according to sources familiar with the panel's inquiry.
They said Cavanaugh had told subcommittee investigators -- and is expected to testify -- that the Justice Department probe has been at a standstill since last summer, despite evidence of more than $1 million in questionable billings. For example, Pratt & Whitney charged the Pentagon to lease luxury cars for more than 80 executives who later were allowed to buy the cars at cut-rate prices.
It is highly unusual for a law-enforcement official to testify about an ongoing criminal investigation. But FBI officials apparently are frustrated by federal prosecutors' reluctance to bring charges.
Officials in the U.S. attorney's office in Miami have told the subcommittee that chances for a successful prosecution are clouded by the Pentagon procurement rules' ambiguity, the sources said.
Pratt & Whitney spokesman Jim Linse said federal prosecutors have not contacted the company about the case since November 1983. "We cooperated with the questions of the grand jury, and beyond that I can't comment because grand jury proceedings are secret," he said.
Linse said the company withdrew some overhead charges as a result of "a normal internal review" in early 1983, after the investigation began. He said Pratt & Whitney withdrew $191,892 in charges from its $667 million overhead accounts for 1981 and 1982.
Pratt & Whitney is a subsidiary of Connecticut-based United Technologies Corp., the nation's seventh-largest defense contractor, with annual Pentagon sales of about $4 billion.
Tom Drohan, a United Technologies vice president, said the hearings appear to involve "a rehash of unfounded allegations relating to overhead expenses charged to the government that were thoroughly investigated a few years ago." He said Pratt & Whitney "has a good cost-accounting system in place that is designed to ensure that the government is not charged for questionable items."
Drohan added that the disputed charges "were few and far between, involved small amounts and have long ago been corrected."
Stanley Marcus, the U.S. attorney in Miami, declined comment.
Questions about Pratt & Whitney were raised by Pentagon auditor George R. Spanton, who challenged more than $1 million in the company's overhead billings for 1981. The Pentagon responded by beginning an investigation of Spanton.
Spanton took his findings to the news media and the FBI, which began an inquiry in July 1982. Spanton, now retired, also is to testify.
The FBI finished its probe last summer. In January, the FBI wrote to Marcus that it would close the case unless indictments were brought within 45 days. Marcus then assigned a new prosecutor.
According to company documents, Pratt & Whitney has charged the Pentagon for:
* Deep-sea fishing charters and golfing fees to entertain Air Force officers, some of whom had asked Pratt & Whitney to arrange the outings. Accepting gifts or entertainment from contractors violates Pentagon rules.
* A seminar for executives' wives at the Old Port Cove Yacht Club in North Palm Beach. The session, which cost $4,596, was "to discuss the unique problems, challenges [and] concerns" facing "spouses of senior management."
A $67,500 donation to the Oklahoma Art Center made at the request of Maj. Gen. J.T. Edwards, then a senior Air Force procurement official in Oklahoma City. "As we discussed," company executive F.W. McAbee Jr. wrote Edwards in 1982, Pratt & Whitney "will be pleased" to pay half the cost of an art exhibit at the center.
A Pratt & Whitney spokesman said the donation was charged in error and was later withdrawn.
* Leasing costs for executives' cars that totaled $266,293 in 1981. The executives later were allowed to buy the cars at discounts averaging 36 percent, and Pratt & Whitney rented them new ones. In one case, Pentagon auditors said, an employe leased a Mercedes with an original value of $24,836, then bought it 2 1/2 years later for $6,600. They said another employe bought a $15,650 Cadillac after two years for $6,904.
In a written rebuttal, the company disputed many of the figures, saying that executives paid the full market rate when they bought the cars. The company said that executives charged mileage expenses for business only and that the cars were "reasonable and allocable to government business."
* Thousands of dollars for tickets to Miami Dolphins football games, golf tournaments, the Burt Reynolds Dinner Theater and the National Rodeo in Oklahoma City.
About $80,000 in rebates on air conditioners sold to employes by another United Technologies subsidiary, Carrier. The rebates, which then were billed to the Pentagon, were offered to employes at a time of depressed sales.
* Lavish parties and receptions featuring musicians and menus ranging from lobster to steak tartare. Many of the parties were to entertain Pentagon officials, foreign dignitaries, members of Congress and other defense contractors.
* A $3,231 dinner at the King David Hotel in Jerusalem to discuss possible changes in Israeli military procurement. The company also entertained other countries' military officials. Pentagon rules do not allow contractors to charge it for foreign marketing efforts.