Scope of Defense Probe Broadening : Weinberger Told Data Was Leaked by Lehman Aides

ALEXANDRIA, Va. —  Former Secretary of Defense Caspar W. Weinberger was warned at least three years ago that defense contractors had a “direct pipeline” to classified Pentagon budget documents through “leakers” in Navy Secretary John F. Lehman Jr.’s office, according to a heavily edited Defense Department report disclosed in federal court files here.

The report discloses that leaked documents ranged from budget and procurement memos to internal correspondence between Lehman and Weinberger. The document, identified in court records as a “talking paper,” was drafted by security officials at Weinberger’s request for discussions between him and Lehman on the subject.

Unfair Advantages

Although it apparently was prepared well before the current defense fraud investigation, the report exposed a pattern that is at the heart of the inquiry: defense contractors’ and their consultants’ use of classified, inside information from high-ranking Pentagon sources to gain unfair competitive advantages in bids for national defense contracts.

A key Navy procurement official at the time was Melvyn R. Paisley, a close Lehman friend and associate described by federal law enforcement sources as a central figure in the current fraud probe.

Paisley, a former Boeing executive, served in the Navy secretary’s office from 1981 to 1987, when he left to become a free-lance defense contracting consultant.

Before drafting their report to Weinberger, the security officials told him that as many as five Lehman aides “continuously disclosed classified documents,” the records showed, and they recommended that the secretary take immediate steps to halt the practice. Names of the accused aides were included in the original report for Weinberger but were blacked out before the document was turned over to the court.

A Pentagon spokesman could not confirm if any action was taken in response to the disclosures. Weinberger, who resigned as defense secretary last year, was on vacation and could not be reached for comment.

The undated talking paper was subpoenaed by attorneys for a military consultant charged in connection with a 1985 contract fraud case in federal court in Alexandria.

The document was prepared after allegations surfaced that the consultant had turned over classified Navy budget documents to GTE Corp., according to court records. That investigation was conducted between 1983 and 1985, but it was not known when investigators met with Weinberger.

‘Irrefutable Evidence’

In the report, the Pentagon investigators told Weinberger that they had uncovered “irrefutable evidence from an unimpeachable source,” who was not identified, that Pentagon officials had “continuously disclosed classified defense documents.”

They called the office of the Navy secretary “the principal point of origin of (the disclosed) classified documents.” The investigators listed among those leaked documents:

--Correspondence between Weinberger and secretaries of the various branches of the armed forces.

--Weinberger’s private correspondence.

--Memos from Lehman to Weinberger.

--Weinberger’s basic planning document for the Pentagon, the “Defense Guidance.”

--Various program and procurement memos prepared by Pentagon budget officials.

--Program objective memos from the military branches.

The budget and program-related documents alone were characterized by Defense Week, a Washington-based trade journal, in an article earlier this year as “among the most closely held in the Pentagon.”

‘Direct Pipeline’

According to the Pentagon investigators, their confidential source had been told, presumably by a defense contractor, that “they have a direct pipeline to the Office of the Secretary of the Navy for documents” such as those listed.

Rather than urging any kind of investigation, the report recommended that Pentagon officials “take immediate steps to ensure” that Lehman’s staff limit the release of classified documents to authorized parties.

In 1985, sometime after the warning memo for Weinberger was prepared, GTE Government Systems Corp. pleaded guilty to receiving classified documents. Among the most sensitive was the Navy’s Electronics Warfare Master Plan, which, according to Defense Week, contained 32 pages of top secret radio frequencies.

Defense contract consultant Bernie E. Zettl, who along with two GTE officers was charged in that case, is awaiting trial here on related charges of conveying the documents without proper authority. His attorneys have argued that he is being prosecuted for conduct that is “habit and routine practice” among contractors doing business with the Defense Department.