Lehman's Management Blamed For Navy Fraud

Posted: June 20, 1988

WASHINGTON — The autocratic management of former Navy secretary John F. Lehman Jr. created an environment ripe for the type of abuses uncovered by the Justice Department's probe into Pentagon contract bribery, congressmen and a former defense official said yesterday.

Lehman, Navy secretary from 1981 to 1987, used his management style to revamp the Navy's procurement process, but the confusion generated by the changes left openings that unscrupulous officials could have exploited, they said.

"The decisions in the Lehman Navy were really highly centralized in a few people right around the secretary," Rep. Les Aspin (D., Wis.), chairman of the the House Armed Services Committee, said yesterday on ABC-TV's This Week with David Brinkley.

"And he had a very strong view about people who were with him and people who were against him - and some of the people who were with him maybe were shady characters," he said, without offering names.

"But if you were with John Lehman - on his side in all of the fights - boy, you were on the inside. And if you were against him - even though you were honest and capable - you were really kind of stiff-armed in the whole process," Aspin added.

Lawrence Korb, who was assistant secretary of defense for manpower early in the Reagan administration, agreed that Lehman ran the Navy differently from the other services.

"The Navy, when I was in the Defense Department looking at it from the inside, and when I was outside, was a bureaucracy run amok. It was making its own procurement rules in many cases which were different from the Defense Department," Korb said on the ABC program.

"Secretary (Caspar W.) Weinberger was warned about information being leaked from the Secretary of the Navy's office," Korb said of the former cabinet officer. "They were not brought to heel."

Lehman may have tipped off his former Navy deputy, Melvyn R. Paisley, that he was under investigation, the Washington Post and Los Angeles Times reported yesterday. Paisley was the Navy's top weapons designer from 1981 to 1987, and is a central figure in the probe. Lehman could not be reached for comment.

Meantime, President Reagan, attending a summit of Western leaders in Toronto, refused to comment on the reports. "I am not going to comment until we have all the information," he said.

Sen. Sam Nunn (D., Ga.), chairman of the Senate Armed Services Committee, said the Reagan administration's penchant for selecting political friends instead of skilled managers crippled the Pentagon's ability to buy weapons smartly.

"We had people being selected for their ideological beliefs, for their salesmanship, but not for good sound management," he said on the Brinkley show.

According to federal officials, the investigation, dubbed "Operation Ill Wind," involves about 20 Defense Department officials who allegedly sold classified Pentagon data about pending contracts to consultants. The consultants then sold the information to their defense-contracting clients, who used it to get a leg up on their competitors.

In some cases, defense officals also sold portions of companies' bid proposals to competitors.

"It's both an institutional problem and a case of personal greed - it's part of the culture of the military-industrial complex," Sen. Charles E. Grassley (R., Iowa) said yesterday on CBS-TV's Face the Nation. He and Rep. John D. Dingell (D., Mich.), who also appeared on the program, said they had alerted senior administration officials to these types of contracting abuses for at least four years.

"Nothing was done," said Dingell, chairman of the House Energy and Commerce Committee, adding that such abuses should have been anticipated. ''You have a system where there are enomous amounts of money that have to attract the worst instincts of people."

Dingell's panel has investigated Pentagon waste as has the Senate Judiciary administrative practices subcommittee, which Grassley has chaired.

Using wiretaps, the FBI and the Naval Investigative Service monitored hundreds of calls of Pentagon officials and consultants over two years. The probe began after a consultant called a former Pentagon official and offered to sell internal Pentagon data, law enforcement officials said.

According to Sen. John V. Warner of Virginia, the ranking Republican on the Senate Armed Services Committee, consultants were paying defense officials between $500 and $1,000 for classified or confidential information that they would then peddle to their defense-contracting clients or other consultants for up to $50,000.

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