General Electric Co., the nation's sixth largest defense contractor, yesterday pleaded guilty in Philadelphia to 108 counts of defrauding the Air Force out of $800,000 on a nuclear missile warhead contract.
The company agreed to pay the maximum fine of $1.04 million, and the Air Force indicated it would continue for now its suspension on awarding contracts to GE's Space Systems Division, which did the fraudulent billing.
"The Air Force is evaluating today's court action regarding GE . . . ," Lt. Col. Larry Greer said. "Until that evaluation is complete, we will have no further comment."
U.S. Attorney Edward S. Dennis Jr. said company managers cheated the government by altering employes' time cards without their knowledge and by allowing the transfer of overrun labor costs, which were not reimbursable, to other contracts that the government would pay. GE agreed to reimburse the government for the $800,000, in addition to the fine.
However, GE may be required to pay up to twice the $800,000, in accordance with fraud statutes. The amount will be determined by the Justice Department.
U.S. District Court Judge Louis C. Bechtle said the maximum fine was "fully and clearly appropriate here."
The work in question involved replacing older warheads on the Minuteman intercontinental ballistic missiles with the updated Mark 12A. The investigation covered 1980 through 1983.
The Defense Department in March suspended GE from obtaining contracts as a result of the indictment. Air Force Secretary Verne Orr said then that the indictment indicated a "lack of business integrity or business honesty."
On April 18, the Pentagon lifted the ban, except for work by the company's space division, after GE instituted new controls and regulations.
U.S. Attorney Dennis said he is continuing the investigation to determine "which specific GE managers are criminally responsible."
GE spokesman Jack Batty said in a prepared statement that the company originally pleaded not guilty to the indictment because at least 40 current and former employes who testified before a federal grand jury "with full immunity" denied criminal misconduct.
The company changed its plea after one of the employes, Roy Baessler, 40, a former GE unit manager, was indicted for perjury and 10 days ago "admitted that he and possibly others knowingly and intentionally changed time cards incorrectly."
"In light of this information," the statement said, "we accepted responsibility for these intentional errors and changed our plea."
Baessler and another GE manager, Joseph Calabria, 50, a chief engineer, were charged with two counts of "making false declarations" before the grand jury. But perjury charges were dropped against Baessler earlier this month when he agreed to testify for the government against other employes.
Calabria's trial is scheduled for July. If convicted, he faces up to 10 years in prison and $20,000 in fines.
The indictment in March came after a two-year investigation by the FBI, the Defense Contract Audit Agency and the Air Force.
The Mark 12A warhead is a key component of the Minuteman, which is considered the backbone of the land-based U.S. nuclear force that 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.
Yesterday's action by GE was the second time in two weeks that a large company pleaded guilty to criminal charges in a white-collar crime case.
The brokerage firm E.F. Hutton and Co. earlier pleaded guilty to 2,000 counts of fraud for a check-kiting scheme.