A Massachusetts defense contractor that manufactures MX missile components, satellite warfare systems and other sophisticated weaponry yesterday admitted overcharging the Pentagon $1.5 million and agreed to pay $4.6 million in fines, penalties and damages.
AVCO Corp. entered guilty pleas in federal court in Boston to 22 counts of making false statements in its Systems Division's billings to the Defense Department in 1982 and 1983.
The Wilmington, Mass., firm admitted engaging in a complex scheme in which labor costs that it could not charge the government were billed instead as overhead costs for which the company was entitled to seek reimbursement.
"The nation's buildup of its defenses is not an invitation to plunder the public purse," Attorney General Edwin Meese III said in a statement about the case. "Procurement fraud will remain the Department of Justice's highest white-collar crime priority."
A Justice Department spokesman said the $4.6 million payment was the second largest by a defense contractor in a case involving improper billings. AVCO was acquired by Textron Inc. in 1985, after the abuses were uncovered in a surprise inspection by the Defense Contract Audit Agency.
The plea agreement came the day after the Justice Department said it erred in indicting General Dynamics Corp. on charges of trying to hide $7.5 million in cost overruns for the Divad antiaircraft gun by illegally shifting excess costs to overhead accounts. The department also recently dropped a three-year fraud investigation of General Dynamics submarine contract charges.
In pleading guilty, AVCO agreed to pay the maximum criminal fine of $220,000, plus $3,000,956 -- double the amount of its overcharge -- $904,347 in interest and $500,000 to reimburse the government for cost of investigating and prosecuting the case.
Raymond W. Caine Jr. of Textron said the company has "put in place timekeeping reforms at that division to make sure these irregularities do not happen again."
The plea agreement does not cover AVCO employes who may have been involved in the scheme. U.S. Attorney Frank L. McNamara in Boston said that aspect of the investigation is continuing.