An Unexpected Fall From Grace

It was sobering news even for Washington cynics. NASA officials were one Government group considered to be impervious to scandal. Last week, though, a federal grand jury in Los Angeles indicted James M. Beggs, NASA'S administrator and a former executive vice president of General Dynamics, the third largest U.S. defense manufacturer. Although the charge had nothing to do with NASA business, it was still a blow to agency morale and prestige.

Beggs and three General Dynamics executives were charged with conspiring to defraud the Government by improperly billing some $7.5 million while producing the DIVAD, a prototype for a gun designed to protect troops from air attack. The weapon later became known as the Sergeant York when a contract to make it was awarded to Ford Aerospace in 1981. The Sergeant York turned into a misbegotten project that was finally scrapped four months ago, after $1.8 billion had been spent on development.

General Dynamics and Beggs, 59, who almost immediately took a leave of absence from NASA, quickly denied the charges. Said Beggs: "I have not been involved in any criminal wrongdoing . . . I do not intend to leave, and this is not the first step to a resignation." Echoed General Dynamics: "The issue is a highly sophisticated regulatory and accounting matter, which should be resolved in a civil forum, not in a criminal case."

The Government last week fired a second salvo at General Dynamics (1984 sales: $7.8 billion), the maker of the Trident nuclear submarine and the F-16 fighter aircraft. The Navy announced that as a result of the conspiracy charges, the company will be temporarily suspended from obtaining new federal defense contracts, which generate more than 75% of General Dynamics' total revenues.

The edict was softened by one significant exception. The Navy indefinitely extended a deadline for bids on four new attack submarines. This leaves open the possibility that General Dynamics will eventually be permitted to compete for this contract despite its current suspension. According to the Defense Department, the reprieve is an effort to preserve competition among contractors. Only one other firm, the Newport News Shipbuilding & Drydock Co., is capable of making the attack submarine. Said Navy Secretary John Lehman: "This is not an action to protect General Dynamics. This is an action to protect the public interest."

The seven-count, 33-page indictment states that between January 1978 and August 1981, while General Dynamics was working on a $41 million program to build the prototype, it made false statements to the Government and was guilty of fraud. The company is accused of having illegally charged its expenses to other Government accounts. Funds were allegedly used in part to develop computer software and purchase up to $500,000 worth of ammunition. Along with Beggs, who was then a company director, the indictment names lower-level ! officials: Ralph Hawes, division general manager, David McPherson, program director, and James Hansen, assistant director.