Figure in Defense Contract Payoff Scam Is Sentenced

A former Taiwanese air force major who served as a key go-between in a defense contracting payoff scam was sentenced Monday to three years of probation on a federal tax-evasion charge.

Richard Hei, who now lives in Cerritos, received the reduced sentence in exchange for cooperating with federal prosecutors in their continuing defense-contracting investigation. In connection with the same probe, two units of Woodland Hills-based Litton Industries pleaded guilty in June to federal conspiracy charges and agreed to pay $18.5 million in fines, restitution and investigative costs.

Although the criminal case against Litton has been closed, Hei was ordered to continue helping prosecutors in their investigation of other U.S. defense contractors. One of those contractors has been identified as the Sanders defense electronics unit of Lockheed Martin Corp.

Patricia Beaman, assistant U.S. attorney in Los Angeles in charge of the case, declined to say how many other defense contractors may be involved in the probe.

Prosecutors said in court that Hei, 57, accepted $12 million in payments from various U.S. defense contractors from 1988 through 1993. In return, he used his extensive connections and influence within the Taiwanese military to help defense contractors line up business deals.

“In this industry, he was quite well-known,” Beaman said.

Litton admitted in court in June to altering records to conceal payments of $4.3 million to Hei. In return, Hei, a pilot in the Taiwanese air force for 10 years, helped Litton win contracts with Taiwan totaling $47.2 million. The case against Litton also involved its payments of more than $12 million to four Greek agents for their help in securing a $150-million contract to provide a radar system for Greek fighter planes.

In 1993, a unit of the former Teledyne Inc. pleaded guilty to criminal charges and agreed to pay a $1.5-million fine for falsifying records of commissions it paid to Hei. He had helped Teledyne win subcontracts totaling nearly $71 million.

Hei’s plea stemmed from a single count of income tax evasion, involving his failure to report $571,262 in income in 1990. He apparently headed off further charges by agreeing to a plea deal in June 1996 that came before he was indicted.

The federal sentencing guidelines for the tax-evasion charge probably would have called for Hei to serve 12 to 18 months in prison. But U.S. District Judge Harry L. Hupp of Los Angeles handed down the reduced sentence based on a recommendation from prosecutors, who said Hei provided “substantial” help in their probe.

Lawyers for Hei, Litton and Lockheed Martin did not return calls seeking comment. When Litton pleaded guilty to making hidden payments in June, it issued a statement saying that it had “meritorious defenses” to the charges but decided it was in the company’s best interest to plead guilty and “put the matter behind us.”