The Defense Department's inspector general told Congress yesterday that the two top officers of General Dynamics Corp. should be suspended or debarred from federal contracts because of the company's $244 million in improper overhead charges to the government.
The inspector general, Joseph H. Sherick, has no authority to suspend or debar contractors, but is responsible for recommending such penalties to defense procurement officials. A Pentagon spokesman said he had no information that such a review was under way.
Sherick, testifying before the House Energy and Commerce subcommittee on oversight and investigations, was asked what action he would take against General Dynamics, the nation's third-largest defense contractor.
"I would suspend or debar individuals," he said.
Asked if he was referring to company chairman David S. Lewis and chief financial officer Gorden MacDonald, he said: "If you want my recommendation, I'd say yes. I'll recommend it now."
The Justice Department, the Pentagon and several federal agencies are investigating General Dynamics, which recently agreed to repay the government $244 million the company improperly charged for entertainment, travel and personal expenses.
Sherick said that his office is investigating dozens of major defense contractors, but that the Justice Department has been reluctant to prosecute many of the cases he has referred.
In other testimony, Frank C. Conahan of Congress' General Accounting Office said that all major defense contractors routinely charge the Pentagon for entertainment, public relations, personal travel, promotional giveaways and other unallowable costs.
Conahan said an examination of 11 top contractors found that the Pentagon's auditors generally questioned these overhead costs but that less than half the charges were disallowed by its negotiators.
Conahan said Pentagon auditors challenged $45,000 in entertainment charged by Martin Marietta Corp., including a retirement party and golf and country club expenses in New Orleans, Denver and Vail, Colo. Pentagon negotiators allowed all but $10,000, Conahan said.
Conahan said that ambiguous Pentagon procurement rules prohibit payments for entertainment but allow expenses to aid "employe morale." The GAO urged the Pentagon last October to tighten the rules on public relations and advertising costs. The proposed changes are pending.
Conahan said Pentagon auditors also questioned:
* $181,000 in first-class travel, hotel rooms and meals for spouses of Raytheon Corp. executives. The Pentagon allowed $125,000.
* Several companies' expenses at the Paris Air Show. The Pentagon allowed the $35,000 charged by Raytheon and $28,000 by General Dynamics.
* Martin Marietta brochures, prints and models totaling $33,000. The Pentagon allowed $18,000, saying this was a "gray area."
* Thousands of dollars in consulting fees to a former LTV Corp. employe who provided no services to the firm. The Pentagon allowed half the bill because that is how such disputes previously were settled.