U.S. Probes Suspected Fraud at Base : Point Mugu: Both civilians and military officers are under investigation for allegedly bogus purchases that may cost the government close to $3 million.

By RON SOBLE

Oct. 13, 1991 12 AM PT

TIMES STAFF WRITER

A widening federal investigation at the Point Mugu Naval Air Station is turning up evidence that several civilian employees have defrauded the government in the purchase of goods used at the big weapons-testing facility, The Times has learned.

The investigation also has uncovered questionable practices by a handful of base officers in the purchase of merchandise for their offices.

By spring, a federal grand jury indictment is expected to disclose charges against Point Mugu personnel, which could tarnish the prestigious image of the 45-year-old base.

“We will look at everyone who was involved at Point Mugu,” Assistant U.S. Atty. Patricia A. Beaman said in Los Angeles. “It’s mostly civilian personnel.”

Total cost to the government of the many-faceted fraud could be close to $3 million, she said.

One investigator said that kickbacks and bribes, involving suppliers in Ventura and Los Angeles counties and Point Mugu civilian personnel on the Navy payroll, may be so deep-rooted that they have been a way of doing business for several years.

“It’s a good ol’ boy network,” the investigator said.

Last year, for example, a Navy civilian employee at Point Mugu, Jammie Lee Nash, 38, pleaded guilty in Los Angeles federal court to one count of conflict of interest. The charge stemmed from allegations that he solicited and accepted up to $2,000 in kickbacks in exchange for a government painting contract. He was sentenced to three years of probation and fined $800.

Under federal law, all government employees--including the civilians who work for the Navy at Point Mugu--are prohibited from accepting gratuities, even a free lunch or a bottle of liquor.

The inquiry at Point Mugu, which began in August, 1989, is being coordinated by Beaman in conjunction with the Naval Investigative Service, the criminal investigation division of the Internal Revenue Service and the Postal Inspection Service.

Among civilian personnel on the base’s Navy payroll being questioned are some purchasing agents and planners, the latter a job designation for individuals in charge of projects such as construction, remodeling and repairs.

The investigation takes on a high government priority given the critical mission of the base, the Navy’s largest weapons testing facility, officials said. It is the home of the Pacific Missile Test Center, which evaluates state-of-the-art air-launched weapons and electronic warfare systems.

About 13,000 military and civilian personnel work on the oceanfront base, which since its founding in 1946 has launched more missiles than any other U.S. government testing range.

“The nature of the fraud is that it’s subverting our purchasing system on this base, and that makes it very, very serious from our standpoint,” said Alton Davis, a postal investigator.

The base commander, Rear Adm. William E. Newman, 51, a former leader of the Blue Angels flight team, declined to be interviewed by The Times.

“The admiral is concerned about the nature of the investigation and the possibility for more indictments,” base spokesman Harry Lee said. “Therefore, it is inappropriate at this time to comment.”

Newman’s concern about more indictments stems from one returned in August against a former Oxnard businessman and two Camarillo residents who were charged with a conspiracy to defraud the Point Mugu base and Unocal Corp., the oil company.

The three people indicted were Martin S. Anderson, 44, former president of now-defunct Anderson Industrial Supply of Oxnard; Bill M. Frazier, 45, who was employed as a salesman by Anderson’s firm, and Erwin H. Muller, 49, who, according to the indictment, established bogus companies “to supply false and fraudulent invoices which were used in a scheme to defraud Point Mugu and Unocal.”

Muller, a Camarillo businessman, pleaded guilty Oct. 3 before a federal judge in Los Angeles to a conspiracy charge and a federal income tax evasion count. He signed a plea-bargain agreement and has been cooperating with the government in the continuing investigation.

Anderson, whose firm supplied industrial merchandise such as electrical, plumbing and building materials, and Frazier, who has extensive contacts among suppliers and purchasing agents, are negotiating plea bargains with the government.

Anderson and Muller declined to comment on the indictment, on the advice of their attorneys.

Frazier, who is given to Western dress and who sports a big silver belt buckle he said he won in a steer roping competition, has owned a supply firm in Camarillo since 1986.

The August indictment accused Frazier of being the individual who “would solicit and receive requests for cash or personal items from co-conspirator purchasing agents of Point Mugu and Unocal.”

Frazier said he, too, would not comment on the indictment, on the advice of his attorney.

But in response to a reporter’s question, Frazier declared that the Navy at Point Mugu continued to do business with him even after he was indicted.

“They are still buying here,” Frazier said. “I can’t give you a reason why.”

According to the August indictment, the fraud scheme--involving bogus invoices for merchandise never delivered to Point Mugu and Unocal--was carried out between April, 1984, and September, 1986. The investigation of those activities served as a springboard for a broader corruption inquiry into purchasing practices on the Navy base.

Investigators appear to be satisfied that the Unocal phase of the inquiry is completed. Half a dozen or more Unocal employees who worked on five oil platforms off Ventura County have been fired or have resigned.

According to sources, Unocal auditors discovered the fraud scheme in the mid-1980s and reported their findings to authorities, which led to the indictment this year.

Investigators discovered that several Unocal oil platform employees were receiving “$100 cowboy belt buckles by the bucket,” automobile tires, television sets, videocassette recorders and more. Sometimes the Unocal workers would be paid cash bribes ranging from $150 to $1,000, sources said.

The trade-off was that the Unocal employees would keep quiet about the practices of Anderson’s firm, which would bill Unocal for a gratuity “by disguising it as industrial merchandise,” according to the indictment. Unocal then paid Anderson for goods never received, the indictment said.

It did not take investigators long to discover that the Unocal conspiracy was being perpetrated by the Anderson firm in a similar manner at Point Mugu, according to investigators and the indictment.

Investigators believe that as many as two dozen civilian employees at the Navy base may be tainted by the fraud.

A number of Ventura County and Los Angeles County companies that supply the base with a myriad of items like toilet paper and paint--but not weapons hardware--also are being investigated, sources said.

“Two off-base vendors we know are dirty,” one investigator said.

Like the Unocal employees, Point Mugu civilian workers, such as purchasing agents, were receiving “illegal kickbacks,” according to the August indictment. The alleged kickbacks included microwave ovens, refrigerators, home improvements and tools.

In some instances, government investigators did not have to look far for leads.

For example, said a government source, one person under investigation, who is on the Navy’s civilian payroll at Point Mugu, was found to be depositing thousands of dollars into a bank account over the past three years “while living in a modest home” near the base. Circumstances like that naturally arouse the interest of investigators, the source said.

As one interview led to another, it appeared to investigators that some officers also may have engaged in questionable practices.

The officers may have ordered merchandise not authorized by the Navy and may have covered up the purchases by creating fictitious orders for Navy-authorized goods, one investigator said.

For example, investigators are looking into whether one officer used a bogus purchase order to buy an expensive desk, another to get a fancy credenza and a third to obtain a $300 pen set, all for their Navy base offices.

In August, after a federal grand jury had returned the indictment, base commander Newman was given a broad briefing on the investigation.

It has become common knowledge on the base that Newman, a veteran of 130 bombing sorties in Vietnam, is angry that criminal wrongdoing may be widespread on the base.

Newman has declared that he would oust from the base anyone suspected of criminal activity. But government investigators have been unable to provide the base commander with a complete list of suspects because they still have months of digging into the suspected corruption ahead of them.

One government agent declared: “We still don’t know how high up the kickbacks and corruption go.”