U.S. Drops $6-Million Suit Against General Dynamics

The Justice Department on Monday voluntarily dismissed a civil suit against General Dynamics Corp. in which it had sought recovery of up to $6 million in charges on a contract to build a prototype anti-aircraft-gun system.

In a move that was widely anticipated after federal prosecutors dropped criminal charges against the company in June, the U.S. attorney’s office in Los Angeles filed notice that it has abandoned the related civil action.

“The civil action that had been filed against General Dynamics was based upon the same general type allegations that were alleged in the criminal case, and so it logically followed that we did not have a basis for proceeding with the civil action,” U.S. Atty. Robert C. Bonner said.

In the original criminal indictment, General Dynamics and four of its present and former executives, including former National Aeronautics and Space Administration Administrator James M. Beggs, were accused of defrauding the government of an estimated $3.2 million by writing off development costs on the Sgt. York weapons system to unauthorized accounts.

Federal prosecutors moved to dismiss the indictment on June 19, conceding that General Dynamics had been correct in its original interpretation of the contract, which the company maintained required it to simply make its “best efforts” to stay within the $39-million projected development cost.

In the civil case, federal officials were seeking recovery of all funds allegedly misallocated, which Bonner said could have amounted to more than $6 million because of a provision of federal law allowing the government to recover double any amount found to be misallocated.

U.S. District Judge Ferdinand F. Fernandez had stayed any action on the civil case, filed in March, 1986, pending the outcome of the criminal indictment.

Fernandez terminated the stay on June 22 and gave government lawyers until Monday to amend the civil case, presumably to allege a new theory under which civil damages could be recovered.

“We concluded that with respect to the allegations made in the indictment, that in view of evidence that had been discovered after the indictment, there was not a viable criminal case, and it logically followed that the civil cause of action that had been filed suffered from the same defect,” Bonner said.

General Dynamics’ lawyer, Stephen D. Miller, said he had anticipated the voluntary dismissal.

“Really, there was nothing left of the government’s allegations after it made its concession in the criminal case,” he said. “There simply was nothing left of any sort of fraud.”