Feds End Pratt Bill Case

July 31, 1986|By MARCIA H. POUNDS, Business Writer

The Justice Department says it won`t prosecute Pratt & Whitney for alleged improper billings because government regulations were vague when the charges were made.

``We decided we did not have enough evidence for criminal violation,`` said Leon Kellner, U.S. attorney in Miami.

``I did not say the costs were appropriate. They seem inappropriate,`` Kellner said of the public relations and entertainment expenses billed to the government. ``I`m not looking at what should be billed. I`m looking at whether it was a criminal violation to charge it to the government.``

The FBI investigated Pratt`s Government Products Division in northwestern Palm Beach County for more than three years. The defense contractor, which designs engines for fighter jets, billed expenses including lavish parties at The Breakers hotel in Palm Beach; an executive trip to Pago Pago; Pratt souvenirs including golf balls, Gucci bags and baseball caps; cost of air shows; and rebates to employees on air conditioners made by Pratt`s sister company, Carrier Air Conditioning.

The allegations of billing abuses came from George Spanton, a former Pentagon auditor who last year described extravagant spending at Pratt to a House subcommittee on oversight and investigations.

Pratt has refused to discuss the allegations. ``We`re pleased with the decision, and we don`t believe it requires any further comment,`` said Dale E. Smith, Pratt`s spokesman, of the Justice Department`s decision not to prosecute.

Spanton, who is now retired in Riviera Beach, was not pleased. ``I might be a loser, but so is the taxpayer. . . . Why would the FBI investigate for three years if they didn`t suspect wrongdoing?``

After reviewing the FBI`s findings, the U.S. Attorney`s Office recently sent a recommendation to decline prosecution to the Justice Department. The department concurred, issuing a one-page statement.

``The regulatory principles in existence at the time were vague, conflicting and overlapping in crucial respects, and amorphous concepts such as `public relations` and `employee morale` made it impossible to determine whether the types of costs submitted for reimbursement should have been included in the 1981 claim,`` the statement said.

Also contributing to the decison not to prosecute was the Air Force`s reluctance to break out expenses in prior years that should be excluded from the 1981 billing. The Air Force had a practice referred to as ``bottom- lining,`` a negotiation technique where the contracting agency doesn`t look at specific costs but at the claim as a whole.

Kellner said ``bottom-lining`` is no longer allowed and that other improvements have been made in military procurement. He said contractors now have to identify and account for costs and that there regulations are clearer as to what is allowed under federal contracts.

Kellner said this was not the case in 1981. ``We had to decide whether the corporation should have known it could not submit that cost for reimbursement. ... We could not make that allegation for a criminal case,`` he said.

Spanton said Kellner`s reasons for declining prosecution are not valid.

``It is virtually impossible to write laws to cover what Kellner is suggesting. What you have to go by is what is reasonable,`` he said. ``If the American people consider lavish parties, Gucci bags and the like reasonable (expenses), then I`m unreasonable.``

Spanton said it his understanding that only costs necessary to perform a government contract should be charged to that contract. He said, ``How would a thousand golf balls be necessary to build jet engines?``

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