Military Defense Fraud!
This is about one of my two experiences with corporate
crime - deadly fraud in the defense industry business, fraud that resulted in the deaths of several
people in our nation's armed services.
In the late 1970s and early 1980s, U.S. Army helicopters were
falling out of the sky, killing several armed services members. An investigation done by the Department
of Justice (DOJ) suggested that a company headquartered in Chicago that was under contract with the
Department of Defense (DOD) had falsified Article One Test results, meaning they had reported that their
gyroscope for Army helicopters met the required contract specifications when they had not, resulting in
the Army purchasing defective gyroscopes.
The United States District Attorney in Chicago decided to call for a grand jury investigation and, if possible,
obtain indictments against those responsible for the criminal fraud. The critical initial, though not primary,
grand jury "target" was the technician who first signed off certifying that the test results on the company's
prototype gyroscope had comported with the specs, and therefore resulted in the contract for the gyroscopes being
awarded to the company. (The company was a subdivision of a major military defense contracting corporation.) The
DOJ figured that if they targeted the technician, he would likely be willing to make a deal to testify against
the higher ups the DOJ thought ordered him to fudge the initial test results.
The technician called me, and I was hired to represent him as defense counsel - with the company that built the
gyroscopes picking up my fees and expenses, not the technician personally. The company itself had their own fleet
of criminal defense and civil lawyers, a team I wasn't part of - although I spoke to one of it's members at times.
To their credit, the company's attorneys never tried to tell me what to do. I'd made it clear from the start that
my loyalty was to my client, not to the company merely because it was picking up the tab. No problem. I racked up
some top-dollar hours doing research, drafting motions, visiting folks in Chicago - all on a nice expense account. 'Twas big fun for me.
After a few months, something happened that caused the Department of Justice to drop the grand jury investigation
and not pursue charges against anyone. What happened? Get this. The company's civil lawyers filed suit against the
DOD claiming that the Pentagon had given the company bad specifications for the gyroscope to begin with, that these
bad specs had resulted in the bad gyroscope, and because of all this the company stood to lose, say, around $200 ($470 today) million
(I forget the exact figure) due to losing contract payments on the gyroscope. The DOD, wanting to stay on good terms with
the parent corporation (the big defense contractor) and get more of their products in the future, decided to settle the case.
The Pentagon paid the mother company around $140 million in settlement of the claim!
I took this information to the U.S. District Attorney in Chicago, who was stunned. The Department of Defense hadn't consulted with
the Department of Justice before making the settlement, the District Attorney told me. And the settlement was one which severely undercut
the prosecution's claim that the Article One Test results had been falsified since, after all, how could that be the case if the
DOD was to blame. The DOD, of course, said that the settlement wasn't an admission of responsibility, but everyone knew the settlement
effectively looked like such an admission and that it would to a jury, although it would have been quite tricky to get it into evidence
unless the prosecution slipped up which it easily could.
No criminal charges were ever brought against anyone? Millions of dollars were paid to the parent company? This did not then and still
does not appear to be "justice" to me. I saw it as a case where the Pentagon and a major defense contractor were in bed together. No party
took responsibility for the deaths of America's women and men in uniform. I was appalled to say the least.