Defense fraud is a tough case for Justice
In 1984, in a little-known trial here, William V. Miller was acquitted of stealing from the United States government by giving secret documents to a defense contractor. Mr. Miller, a defense consultant, admitted in court documents that he had illegally passed classified information. But he was acquitted by a federal jury in part because of testimony by a Pentagon official that such activities were commonplace, according to sources familiar with the case.
The Miller trial illustrates how difficult it may be for federal prosecutors today as they undertake one of the most sweeping probes of the defense industry in history.
To build its case, the government is marshaling its forces, unlike the Miller case which had about half a dozen investigators and attorneys working on the case. Scores of FBI agents and prosecutors are involved in the current probe - probably more than have ever been put into an investigation of this kind before. They have issued 275 subpoenas, conducted at least 42 searches in 12 states and the District of Columbia, and listened in on more than 4,000 wiretapped conversations.
Still, defense-fraud specialists say the government has a tough fight on its hands. They point to the difficulty of defense-fraud and bribery cases in general, and the peculiarities of this probe in particular, which involves not only consultants and defense contractors, but high-level Pentagon officials as well.
``Generally speaking, defense cases are some of the most complicated, if not the most complicated, cases we encounter,'' says Theodore Greenberg, deputy chief of the fraud section in the Justice Division's Criminal Division. He stressed that he was speaking generally, not about the current investigation.
The complexity and scope of the probe may explain why the government is backing off from its early optimistic forecasts about the pace of the investigation. Soon after the probe was made public, Attorney General Edwin Meese III predicted indictments would be issued within ``30 to 90 days.'' Last week he said it may take longer.
In fact, one former government prosecutor, who is now a defense lawyer, says flatly, ``It would not surprise me to not see an indictment for a year.''
The two-year probe, dubbed ``Operation Ill Wind,'' is believed to have started with information from a single informant. It has since mushroomed into what prosecutors suspect is a pervasive practice, in which consultants gathered inside information about Defense Department contracts, budgets, and plans from Pentagon officials, often with bribes of cash or promises of future income. They then allegedly passed the information to defense contractors.
Before the government can turn its suspicions into indictments and convictions, it will have to leap several hurdles, according to prosecutors and defense lawyers. That may not be easy: In two similar cases - among the handful that have gone to court over the same issues in the current investigation - the government has either dropped charges against most of the defendants, or lost the case.
One hurdle in many defense-fraud cases is proving an individual or company intended to defraud the government, says Mr. Greenberg at the Justice Department. ``A defense that is often raised is that there is no criminal intent because information is routinely passed around in a symbiotic relationship between the Defense Department and industry,'' he says.
In the Miller trial, for example, the defense witness from the Pentagon underscored this point when she testified that ``95 to 99 percent'' of information about defense contracts was obtained through unofficial channels, that is, defense consultants.
``It's in the government's best interest that contractors have this information,'' said Caroline Chewning, an employee at Defense Advance Research Projects Agency, according to court documents. ``If they had to go to `official channels,' it may take them six months to get them.''
Another problem is the government's reluctance to release classified information in court. The defense may request such documents to buttress its case. If the judge grants that request, the government would have to decide whether it would rather release the information, or narrow or drop the charges. That is the battle being fought in another case that parallels the current investigation. In that case, which is ongoing, a defense consultant is charged with passing a classified budget document to the defense contractor GTE Government Systems Corporation. The government has ``refocused'' the case against the consultant and dropped charges against two GTE officials, reportedly because the Navy does not want the classified information introduced in court.
Moreover, prosecuting defense procurement fraud is often tough because lawyers must master not only arcane defense-contract regulations, but also complex weapons systems and technologies. ``What do FBI people know about the procurement process,'' says Lawrence Korb, a former assistant secretary at the Pentagon. ``What appears to be fraud may not be fraud,'' he adds.
In cases where information is ``stolen,'' as opposed to a tangible object, it is more difficult to show that a crime even occurred. To gather evidence of the crime, prosecutors need ``a window into the evidence,'' says Fred Heather, a former assistant US attorney in Los Angeles, who now includes defense companies among his clients. That usually means, he says, either wiretaps of conversations or the cooperation of someone involved in the alleged crime.
In ``Operation Ill Wind,'' the government claims to have ``extensive'' taps of incriminating conversations and some videotapes of meetings. Even with wiretaps, the government could run into problems if it cannot get supporting testimony, says Suzanne Garment, a resident scholar at the American Enterprise Institute.
``Whenever you have wiretaps of political hustlers,'' she says, there will be a lot of ``boasts,'' and the ``large proportion is not true.''
Some defense lawyers speculate that the reason for all the leaks in this case, even though indictments may be some time away, may be because the government is trying to get people to come forward and cooperate. Several people, including Pentagon officials, are believed to be talking to the government.
Despite the potential problems, this doesn't mean people will get off scot-free. Specialists such as Mr. Heather say that in defense kickback and bribery cases, if the government does have good inside evidence and corroborating evidence, the conviction rate is ``quite high.''