Former Cubic Chairman Is Sentenced

SAN DIEGO —  C.C. (Sam) Wellborn, the former chairman of Cubic Corp.’s Defense Systems subsidiary, was sentenced to 18 months in prison Friday for conspiring to bribe a Pentagon official in an attempt to win Defense Department contracts.

The sentencing on two felony counts in U.S. District Court in Alexandria, Va., stemmed from the federal government’s continuing Ill Wind investigation into Pentagon procurement fraud. Wellborn, 58, who also received two years’ probation and a $15,000 fine, had faced a maximum sentence of 15 years in prison and a $500,000 fine.

For Wellborn, Friday’s sentencing ended a nearly three-year odyssey that began in the summer of 1988, when agents from the Naval Investigative Service and the FBI searched his San Diego office for evidence of criminal wrongdoing.

Investigators, who previously had tapped the longtime executive’s telephone, seized a 6-inch stack of documents during their search.

The investigation eventually uncovered evidence that Wellborn was illegally conspiring to obtain information that Cubic could use to bolster its chances of winning hotly contested contracts for “Top Gun” air combat training systems that the armed forces use to train flight crews.

In 1989, Wellborn, who had been officially described as a “target” by Ill Wind investigators, abruptly ended his 32-year career with Cubic Corp. when he resigned as chairman of the Defense Systems subsidiary and as a senior vice president of the parent company.

Cubic founder and Chairman Walter Zable at the time praised Wellborn for providing “32 years of dedicated service.” Wellborn, Zable added, would be “sorely missed.”

Wellborn’s involvement in Ill Wind astounded those who had worked with the longtime Cubic executive.

The investigation “just seemed to be so far-fetched to me,” said Raymond L. deKozan, chairman of Cubic’s Automatic Revenue Collection Group. “Until the day that (Wellborn’s plea bargain) came out in the paper, I always felt like it was a bad dream . . . that one day it would all be over and he would be exonerated.”

“It’s awful hard for me to believe it because I always knew (Wellborn) as an honest man. . . . He always treated me and everyone around him nicely,” said DeKozan, who has known Wellborn for about 20 years. The Ill Wind affair was “one incident that should be balanced against a lifetime of other things,” DeKozan said.

Wellborn, who was the only Cubic employee charged in the Ill Wind investigation, has remained largely silent about his role in the investigation. Earl J. Silbert, Wellborn’s Washington-based attorney, on Friday declined to comment on the sentencing.

U.S. District Judge Claude M. Hilton in Alexandria, who on Friday sentenced Wellborn to 18 months on each felony count, ordered that the sentences run concurrently. Wellborn will serve his prison sentence at a federal facility in Boron, Calif.

While Hilton initially calculated Wellborn’s sentence at between 33 to 41 months, he subsequently reduced it after learning from federal prosecutors that Wellborn has cooperated in the continuing Ill Wind investigation.

Friday’s sentencing came three months after Wellborn pleaded guilty to two felony counts as part of a negotiated settlement with federal prosecutors.

Cubic Defense Systems, which in January pleaded guilty to three separate felony counts of conspiracy, theft of government property and filing false statements, has paid $4.6 million in fines and penalties.

According to court documents, Wellborn agreed to pay about $500,000 to William M. Galvin, a Washington-based defense industry consultant. Wellborn, whose office telephone had been tapped by federal investigators, allegedly made the payments with the understanding that the funds would be used to obtain sensitive Defense Department information from former Deputy Assistant Air Force Secretary Victor D. Cohen to influence the award of three contracts.

Galvin eventually pleaded guilty to a separate charge, and last September he received a 32-month prison sentence. Cohen has denied any wrongdoing and has not been charged in the Ill Wind investigation.

Friday’s sentencing ended Cubic’s involvement with the Ill Wind investigation, which has produced about 40 convictions. Executives at other companies touched by the investigation have received sentences ranging from time spent in halfway houses to a 32-month federal prison term. The inquiry also led to about $40 million in fines and penalties.

Although Cubic’s negotiated settlement did not prohibit the San Diego-based company from seeking Defense Department contracts, the agency regularly reviews companies that are found guilty of criminal activity.

A review could bring the suspension or permanent disbarment of Cubic. However, Cubic executives believe the subsidiary will remain on the approved list of Pentagon suppliers because of its new management team and a strengthened ethics policy.

The investigation also prompted a shareholder lawsuit against Cubic that alleged fraudulent activity by Wellborn and other Cubic executives. Cubic acknowledged no guilt when that suit eventually was settled.