Rockwell International

Donald Beall, Chairman and chief executive officer of Rockwell International Corporation, recognizes that the age of military budget cutting has arrived and that his company, which has long relied on major defense contracts must adjust. Beall assures all who will listen that Rockwell already produces products for a range of markets not associated with defense and that it will diversify even further in the future.

Beall's claims are not groundless. In 1985, for example, word leaked that Rockwell employees had been hard at work producing a range of items from paperweights to bus jacks. Unfortunately for Rockwell, the leak was from the Federal Bureau of Investigation, which revealed that the items were being illegally produced and fraudulently billed in a government-owned model shop supposedly used to produce prototypes of future high-tech weapon systems. The model shop is located at Rocky Flats, the government-owned nuclear weapons plant near Denver, Colorado. Rockwell had managed Rocky Flats since 1975.

From 1975 to 1985 when an FBI raid ended the practice, approximately 10 Rockwell employees produced over 4,000 "personal items" in the model shop. The list of items includes baseball caps, award plaques, jewelry, a grand-father dock, picture frames and paperweights with the insignia, "Would We Lie to You?" Many of these items were given to Department of Energy officials as gifts, and all of the items � worth more than $1 million � were charged to U.S. government contracts.

Rockwell's upper management contends that the abuse was isolated, but these claims are contradicted by statements submitted to Congress by John David Navarette, the Rocky Flats model shop employee who blew the whistle on the impropriety. According to Navarette, "These 'services' were widely known and utilized by personnel within the Rocky Flats facility. Several Rockwell managers ... had items made for themselves, their friends and their employees. Security guards were regularly given preference in ordering items in exchange for their looking the other way when finished products were moved out of the facility." For now, with legal actions filed against Rockwell still pending, Rockwell officials refuse further comment on the case.

The saga of fraud in the model shop is but one chapter in the history of a company that has long counted the profits from government contracts with one hand and misused the public's money with the other.

Ironically, thanks to the US. government, the company founded by W.F. Rockwell in 1919 nearly collapsed in its infancy. Started as a producer of truck axles, Rockwell's company faced ruin after World War I when the government flooded the market with war-surplus trucks. From that point forward, company managers tried to avoid reliance on any single industry. The once struggling axle company has since become a diversified multinational conglomerate, number 29 on the 1990 For-tune 500 list, with $12.6 billion in sales last year.

W.F. Rockwell's association with the Mellon family of Pittsburgh helped fuel his company's rise to prominence. Through the twenties and thirties, the Mellons helped Rockwell by backing takeover bids and by selling him various Mellon properties and businesses at bargain prices.

During this period, the company also began forging its close ties with the military. Between world wars, Rock-well worked closely with the military on truck and tank designs. A Rockwell subsidiary supplied approximately 80 percent of the Army's heavy duty axles during World War II.

Fearing a similar dropoff as occurred after World War I, the company pursued greater expansion and diversification following the end of the second World War. Rock-well Standard and Rockwell Manufacturing � the centerpieces of the family empire�acquired 44 smaller companies between 1945 and 1967, including North American Aviation (NAA), a perennial top 10 defense contractor.

Rockwell also expanded geographically in the late 1960s, becoming a genuinely multinational company. In 1973, North American Rockwell, desiring a more global image, changed its name to Rockwell International. By 1974, Rockwell had established subsidiaries in England, Germany, Italy, Mexico, and Chile and had over $560 mil-lion in foreign sales, accounting for over 20 percent of company profits.

The company works in four areas: automotive, graphics, electronics and aerospace. All have been financially successful. With $4.9 billion in 1989 sales, electronics stands as Rockwell's leading division. Of those sales, $1.75 billion were to the government, including $335 million for the intercontinental ballistic missile guidance and control systems.

Rockwell's success in the electronics field is recent, however. Following an unsuccessful venture in this area in the 1970s, Rockwell's electronics' fortunes changed for the better in 1985 with the acquisition of Allen-Bradley Company, a manufacturer of industrial automation equipment which is now Rockwell's leading electronics subsidiary.

The electronics division's sales passed those of the more well-known aerospace division in 1988. Last year, electronics sales were more than $1 billion greater than the aerospace division's total of $3.9 billion. Noting the discrepancy, Donald Beall told the Wall Street Journal, "What we do is not fully understood. It drives me up a wall." Beall aims to alter public perceptions of Rockwell, but this is not an easy task. For years, Rockwell's most visible, profitable, and controversial projects have been in aerospace.

Perhaps more than any other project, the B-1 bomber has dominated the Rockwell tableau and shaped the public's perception of the company.

The B-1 project has been filled with cost overruns, performance downgrades and budget misrepresentations. When plans were first drawn in 1969, Rockwell estimated the cost at $29 million per plane. By the time Rock-well won the contract less than a year later, cost estimates reached $44 million per plane. For the next five years, Rockwell and the Air Force denied rising cost estimates.

While understating its cost, Rockwell and the Air Force overstated the capabilities of the plane. Rockwell soon began downgrading performance standards for the B-1. In 1971, "takeoff performance standards" were reduced by 10 percent, making the plane no quicker on the ground than commercial jets like the Boeing 747. Soon after, the Air Force announced that the plane would be heavier and fly more slowly than originally projected. Rough-landing-field capabilities were "relaxed somewhat," " and the space-age pilots' escape capsule, an important selling point for Rockwell's B-1, was dropped from production plans. While becoming more and more expensive, the B-1 was becoming less and less capable.

In 1977, Jimmy Carter scrapped funding for the B-1 project, which had been projected to reach $700 million under the Ford administration. Still, Rockwell and the bomber would not die. Carter and Congress budgeted several million dollars for research and development projects. This money allowed Rockwell to maintain re-searchers, engineers and raw materials crucial for continued development of the plane.

Soon after his election, in October 1981, Ronald Reagan announced that the government would purchase 100 B-1 bombers from Rockwell. Reagan promised that the fleet would cost $20.5 billion, or $205 million per plane. Shortly after Reagan announced his intent, the Congressional Budget Office suggested that the real cost of the bombers would be $40 billion, or $400 million per plane. When Rockwell completed production of the B-1s in 1988, the cost had reached $228 million per plane. Now, as problems persist with the plane and the need mounts for corrections, the "final" price continues to increase. A February 1989 General Accounting Office (GAO) report predicts that the cost per plane, after correcting the array of problems that have accumulated, will reach $400 mil-lion, the highest estimate and the same figure predicted several years earlier by the Congressional Budget Office.

Despite the B-1's huge cost, its performance record has been poor. In March 1989, after discovering a serious fuel leak in one of the planes, the Air Force grounded the entire fleet of B-1 bombers. It was the third such grounding in 18 months, and it reflected the Air Force's ongoing difficulty in getting the 8-1 in the air. In August 1984, a B-1 prototype crashed, killing one person. The Air Force later disclosed that the plane's automatic flight control system issued no warning, in spite of the fact that the plane was tumbling from the sky. In September 1987, three pilots were killed when a flock of birds flew into a B-1's engines, causing the plane to crash. Another B-1 experienced a fire in its engines and crashed in November 1988 at Dyess Air Force Base in Texas.

The 1989 GAO report on the B-1 identified no fewer than six major flaws in the B-1 that raise doubts about the plane's safety and ability to meet mission specifications. In short, the B-1 bomber, now over 10 times more expensive than originally projected, is not ready to fly.

"The consensus in the defense community," reports Dunbar Lockwood of the Center for Defense Information, "is that the B-1 bomber has been a badly mismanaged pro-gram "

As a government contractor, Rockwell has done worse than mismanage projects; it has repeatedly engaged in criminally fraudulent behavior. In an effort to increase profits and meet budget requirements, for example, Rockwell mischarged the government for work on various aerospace projects, including the space shuttle and B-1 in the late seventies and early eighties. Rockwell's contracts for the B-1 bomber and the Global Positioning System (GPS) were "fixed-priced" contracts, meaning that when costs exceeded a certain predetermined ceiling the additional funding would come, in part, from company profits. On the other hand, Rockwell signed a "cost-plus" contract � which guaranteed the company a certain level of profit not matter what its costs � for space shuttle work.

In a 1982 letter to congressional investigators, June Gibbs Brown, NASA's Inspector General, revealed that a large portion of Rockwell's work on the fixed-price GPS project was being charged to open projects like the space shuttle. A few months earlier, in November 1982, the Justice Department agreed to a $1.5 million civil settlement with Rockwell after investigating similar allegations. According to Brown's letter, the settlement may have been too easy on Rockwell. NASA audits revealed that Rockwell's cost-plus government contracts, had huge cost overruns, some as high as 400 percent. Rockwell's fixed-price contracts, underwritten by the company when costs exceed projections, had no over-runs.

Subsequent to the NASA audit, the B-1 was caught in the cross-charging scandal. In 1983, a Rockwell employee told Common Cause magazine that his supervisors required him to charge work done on the B�1 to the space shuttle contract. The employee, Robert Wityczak, claims that he and over 25 other employees billed raw materials, employee wages and other costs for the B-1 to the space shuttle. Rockwell denies the charges.

More recently, in January 1989, Rockwell pleaded guilty to overbilling the Air Force $500,000 for work on the NAVSTAR satellite system. The following March, a U.S. District Judge in Los Angeles imposed a $5.5 million fine, the largest criminal penalty ever levied in a defense billing fraud case.

Rockwell's response to revelations of its fraudulent activities has been to shoot the messenger. Wityczak claims that, upon exposing the B-1 mischarging scandal, he was harassed by the company. His superiors, Wityczak states, called him "anti-management, anti-Rockwell, and a pain in the ass." He charges that they demoted him, forced him to conduct menial labor and finally fired him.

Wityczak has not been the only whistleblower harassed by Rockwell. In a lawsuit filed in U.S. District Court in Houston, Rockwell employee Ria Solomon alleges that company officials harassed her after she complained about fraud and safety problems on the space shuttle project (see sidebar). Other Rockwell employees echo Solomon's complaints. The whistleblower in the Rocky Flats model shop, John David Navarette, has been as-signed "miscellaneous menial work and simple drafting despite his 30 years of experience," notes the lawsuit he has filed. "Moreover, he has been subject to almost constant ostracism by his co-workers, which his friends tell him is encouraged by Rockwell, and to accusations of'incompatibility' and 'attitude problems' from his superiors."

The misdeeds at the model shop turned out to be the least of the problems at the Rockwell-operated Rocky Flats complex. The Rockwell management at Rocky Flats disposed of toxic wastes with disregard for their environmental impacts, maintained abhorrent health and safety conditions for plant workers and allowed more than 60 pounds of plutonium to become trapped and accumulate in the plant's ventilation piping. "Managerial competence at the plant appears to have been almost non-existent," says Melinda Kassen, a lawyer with the Environmental Defense Fund (EDF) in Boulder, Colo. and a member of the Rocky Flats Environmental Monitoring Council, a quasi-governmental citizens' committee established by Colorado Governor Roy Romer and Representative David Skaggs, D-Colo.

Rocky Flats gained national attention in June 1989, when the FBI, armed with a warrant, invaded the complex. The Justice Department affidavit for the warrant accused Rockwell of dumping toxic chemicals in waterways that feed Denver's drinking water supply and burning hazardous waste in an incinerator that was supposed to be closed. Moreover, the affidavit stated, Rockwell and the Department of Energy (DOE) sought to keep the public from knowing "just how bad the site really is.... There is probable cause to believe that Rockwell and Energy Department officials have knowingly and falsely stated Rocky Flats' compliance with environmental laws and regulations and concealed Rocky Flats"serious contamination."

In February 1989, four months before the FBI raid, the Sierra Club launched a suit against Rockwell and DOE, seeking to prevent Rocky Flats from operating an incinerator without a permit. According to Adam Babich, an attorney with the Sierra Club, the suit sought to force Rocky Flats to obtain a hazardous waste permit for a plutonium recovery incinerator which burned a mixture of radioactive material and hazardous waste. The Sierra Club has settled the suit with Rockwell on confidential terms, but its suit against the DOE continues, as does a second Sierra Club suit against both Rockwell and the DOE, which seeks to prevent a second incinerator at Rocky Flats from operating until it receives a hazardous waste permit.

With the revelation that Rocky Flats had been discharging toxic wastes into creeks that flowed into Denver's drinking water supply, the state of Colorado refused to allow the complex to continue its past practices. This created a problem for Rockwell, which found the ponds it used to hold its waste close to spilling over in September 1989.

On September 21, Rockwell sued the justice Department, the Department of Energy and the Environmental Protection Agency, charging that the company was being forced to meet government contract specifications which could not be reconciled with the environmental standards it was now being forced to meet.

One day later, Rockwell announced it was dropping the contract. It was the first time a contracting operator had withdrawn from a nuclear weapons complex in mid-contract. Since January 1, 1990, when a new contractor, EG & G, a Massachusetts scientific equipment corporation, replaced Rockwell, operations at Rocky Flats have been suspended to correct safety and environmental problems.

In addition to resolving problems with the disposal of toxic waste, EG & G will have to improve workplace safety and the complex's management of plutonium. Based on Freedom of Information Act requests, the Denver Post reported in September 1989 that nine workers had inhaled or been exposed to plutonium in seven separate accidents in the years 1981-1987. And a report from the National Research Council found that "some work areas [at Rocky Flats] are perpetually contaminated, and some production operations are conducted in a manner that makes contamination control virutally impossible. For many years there has existed at Rocky Flats a 'respirator culture' � a feeling that as long as workers wear respirators, it is unnecessary to seek to maintain a contamination-free work area."

Additional potential health problems for workers and the area surrounding Rocky Flats stem from plutonium dust which has escaped filters at the complex. An inquiry by EDFs Kassen, in her capacity as member of the Rocky Flats Environmental Monitoring Council, led to the disclosure by EG & G in March 1990 that approximately 62 pounds of plutonium are lodged in waste ventilation piping and ductwork at Rocky Flats. The huge amount of trapped plutonium has raised fears that some of the concentrations of plutonium may be large enough to cause "criticality," or a nuclear chain reaction. And a report from the Natural Resources Defense Council, completed before the March disclosure claims that plutonium caught in ducts maybe escaping from the plant. Kassen says that the plutonium in the ventilation ducts has accumulated over Rocky Flats' 40 year history, but that Rockwell, which began managing the plant in 1975, is clearly responsible for a significant portion of it.

For Kassen, the most telling evidence of Rockwell's irresponsible management of Rocky Flats comes from the Department of Energy. The DOE traditionally awarded Rockwell the highest bonuses possible under the Rocky Flats contract, in recognition of the company's success in producing nuclear weapons components. But in Rockwell's last year of operating Rocky Flats, the DOE changed its criteria for awarding bonuses to include environmental soundness and workplace safety as well. With these additional stipulations, DOE cut Rockwell's performance bonus from $8 million to $2 million. "Rockwell may have done a great job in production," says Kassen, "but it did a lousy job in the things that make a difference to the community."

In August 1989, executive vice-president Sam lacobellis responded to a reporter's questions about Rocky Flats by displaying company t-shirts that read, "Safety � Watch it Grow at Rocky Flats." Iacobellis asked, "You think I'd go there [Rocky Flats] if I thought it was unsafe?" With Rocky Flats currently closed and Rockwell gone, the irony cannot be missed. It was at Rocky Flats where Rockwell employees, some later harassed by management, illegally produced paperweights with the words, "Would We Lie to You?" The final page of Rockwell's 1989 annual report contains "The Rockwell Credo: What We Believe."

We believe Rockwell people are our most important assets ... We believe we have an obligation for the well-being of the communities in which we live and work We believe [in] ... respect for the individual [and] ... maintaining the highest standards of ethics and integrity in every action we take, in everything we do.

Tom Ruwitch is a freelance writer, living and working in Washington, D.C.

Blowing the Whistle on Rockwell Harassment of Whistleblowers is company policy at Rockwell, charges a suit filed by Ria Solomon, a former employee of a subcontractor which worked with Rockwell on the development of software for the Space Shuttle. Solomon's Racketeer Influenced and Corrupt Organization (RICO) suit charges Rockwell and the Rockwell subcontractor, Unisys, with harassing her and other potential employees who refused "to assist Unisys to overcharge NASA for the work Unisys has performed and continued to perform for the Space Shuttle; to assist Unisys and the Rockwell Shuttle Operations Co. (RSOC, a Rockwell subsidiary) to certify falsely to NASA the safety of flight software which had not been properly verified as safe for flight ... [and] to cover up and conceal management, security and safety problems in the Space Shuttle program." Solomon originally sued Rockwell in conjunction with Sylvia Robins, her former boss, but Robins subsequently reached a confidential settlement with the company. Robins claimed in her suit that she discovered that Unisys was following inadequate safety procedures in developing software. When she reported her findings to her superiors, they told her to drop the matter; when she didn't, they tried to get her fired. Robins' supervisor met with the workers she oversaw, including Solomon, and asked them to state that she had asked them to work overtime without authorizing overtime pay. Solomon refused and then she too was subjected to company harassment. In February 1987, Solomon called the Rockwell ombudsman and reported the harassment to which she and Robins had been subjected. Over the next two months, Robins spoke to Rockwell's corporate counsel, who told her that Rockwell would investigate the two whistleblowers' complaints. Instead of investigating the complaints, however, Solomon's suit holds that Rockwell stepped up its surveillance and intimidation of the two women. Eventually, Rockwell succeeded in convincing Robins to give up, according to Solomon. In June 1988, Rockwell Vice President James McDevitt agreed to meet with Robins in a Washington, D.C. hotel room, on the condition that Robins' attorneys not be present. After the meeting, Robins reached a settlement with Rockwell and destroyed documents which would have substantiated Robins and Solomon's case, Solomon's ongoing suit claims. According to Solomon, her experience was not unique; whistleblowers who contacted the Rockwell ombudsman were regularly investigated by the RSOC Security Department or the RSOC Ethics Committee, which is subordinate to the Security Department. The ombudsman and the Ethics Committee were established by Rockwell in December 1985, after the company pled guilty to 20 counts of billing fraud against the U.S. government. Because the plea followed a 1982 case in which Rockwell entered into a consent decree for misbilling the government, Rockwell faced a suspension from eligibility for government contracting. To avoid this suspension, Rockwell reached an agreement with the Air Force to establish standards of proper conduct and internal controls to permit employees to report misconduct. The institutional mechanisms which were to fulfill these promises were the ombudsman and the Ethics Committee. But the experiences of other whistleblowers, the sworn statements of a whistleblower in the Rockwell security department and documents unearthed by Solomon's suit indicate that these offices were used to investigate Rockwell employees who tried to blow the whistle on their company's misdoings. Suzan Nielsen, a security worker at RSOC, says that "the Corporate Ombudsman line is used to 'finger' employees reporting legitimate complaints [who are] tagged by Security as 'disgruntled' workers." Nielsen claims that RSOC security personnel spy on whistleblowers during and after working hours, engage in illegal searches and seizures of their offices, invade their privacy and use contacts with the police to unethically and probably illegally investigate them. After making statements in support of Solomon, Nielsen says she found herself on Rockwell's "hit list" and was threatened with dismissal. The harassment of other whistleblowers who have agreed to testify in Solomon's behalf seems to confirm Nielsen's charges. After the 1986 explosion of the Challenger shuttle, Allan Eldridge, a former Rockwell quality control engineer, found Rockwell documents that were subject to an impoundment order by the Rogers Commission, which was investigating the Challenger accident. When Eldridge reported his discovery to management, RSOC had the documents removed and did not turn them over to the Rogers Commission. Later, when Eldridge expressed his concerns that changes needed to be made to ensure the shuttle's safety, he says that he was told "not to make waves" by an RSOC manager. Subsequently he was re-assigned to a lesser position, harassed and closely monitored. In April 1987, he was fired without pay or explanation. Eldridge subsequently went public with his claims at the September 1987 press conference where Solomon and Robins announced their suit. According to Solomon's suit, Bette Bardeen, assistant general counsel at Rockwell, directed members of Rockwell's security department to investigate and discredit Eldridge. Danny Myers, a Rockwell security officer, admitted in a deposition that he gained access to the Federal Bureau of Investigation's computer files on Myers through the Harris City (Texas) Constable's Office. A search by the Harris City Constable revealed that a computer investigation of Eldridge had beenundertaken on October 5, 1987. Myers apparently used his credentials as a reserve police officer in a nearby town to gain access to the computer illegally. Based on information obtained from the search of the FBI computer, Solomon's suit asserts, Myers or one of his agents made an anonymous call to the Seabrook police, informing them that Eldridge was wanted by police in Friendswood, Florida. This report was intended to provoke an arrest of Eldridge without probable cause, and, Solomon's suit charges, to intimidate Eldridge. Myers engaged in additional illegal activity, according to Solomon's suit, possibly with the help of the Seabrook, Texas Police Department. In 1988, Beverly Hammond, an engineer with RSOC, reported problems with shuttle software to her superiors. Soon after, she was transferred to a lesser position. When she noticed cars which seemed to be observing her outside of her home, Michael Hammond, her husband, made repeated reports to the local (Seabrook, Texas) police. The license plates of the cars about which the Hammonds complained matched those of Danny Myers and James Roberts, RSOC Security Department Director. The Hammonds also received threatening phone calls which they also reported to the Seabrook police. Roberts' log notes, obtained by Solomon's attorneys, state that an officer of the Seabrook Police Department passed on the Hammonds' complaints to Myers. Roberts' notes say that the officer, "a high school friend" of Myers, "gave Danny info." Subsequently, the Hammonds' complaints disappeared from the Seabrook Police Department. Solomon's case against Rockwell is still pending, and her attorneys believe that if they are able to obtain further records, they will be able to demonstrate even broader efforts on Rockwell's part to intimidate whistleblowers. A Rockwell spokesman said that the company denies all of Soloman's charges, but he declined further comment because the case is in litigation. - Robert Weissman