Cubic Concedes Executive Is Probe Target

Cubic Corp. has acknowledged that C. C. (Sam) Wellborn, president of Cubic’s San Diego-based Defense Systems subsidiary, is a “target” of the federal investigation into Department of Defense procurement fraud.

However, Cubic has continued to maintain that the company itself “is not a target of the investigation,” according to a filing made last week with the Securities and Exchange Commission.

Cubic’s admission that Wellborn is a target marked a dramatic turnaround for the company. Cubic has steadfastly maintained its innocence since the federal investigation became public knowledge in June. At that time, FBI agents searched the offices of Cubic and more than 30 defense contractors, government officials and defense industry consultants.

Defends Wellborn’s Innocence

Cubic Chairman and Chief Executive Walter J. Zable reasserted Wellborn’s innocence in a Jan. 5 letter to employees. Zable maintained that Wellborn, a 30-year Cubic veteran, “deserves respect for his service, recognition of his rights and support for the presumption of innocence with which he is clothed.”

Search of Official’s Home

Zable’s letter was spurred by the recent decision by a federal court in Maryland to release an affidavit supporting the warrant that federal investigators in June used to search the home and office of Victor Cohen, a top Air Force official.

That affidavit included transcripts of conversations among Wellborn, Cohen and William Galvin, a defense industry consultant who has emerged as a central figure in the investigation. Galvin, whose Washington, D.C.-area home and office were searched, worked for Cubic and several other companies involved in the investigation.

Zable, in his Jan. 5 letter to employees, maintained that federal investigators released the affidavit “to embarrass those named in the affidavits and to undermine their constitutionally guaranteed presumption of innocence.”

In a related development, lawyers representing dissident Cubic shareholders last month agreed to drop San Diego-based defense consultant Donald Illeman from a civil suit that seeks damages linked to alleged procurement fraud at Cubic.

Illeman was touched by the procurement investigation last summer when federal investigators in Dallas acknowledged that they had tapped the telephone at Illeman’s San Diego office. Illeman at the time acknowledged that he knew several defense consultants whose telephones were also tapped. He maintained that he was innocent of any wrongdoing.