Lehman Tipoff on Wiretap Suspected : Probers Believe He May Have Tried to Shield Ex-Aide Turned Consultant

WASHINGTON —  Federal investigators are pursuing information that former Navy Secretary John F. Lehman Jr. may have warned Melvyn R. Paisley, former assistant Navy secretary who later became a successful defense consultant, that his telephones were being tapped in a massive probe of defense contracting fraud, The Times learned Saturday.

Paisley, a close friend and associate of Lehman, is described by federal law enforcement sources as a central figure in the widespread fraud and bribery investigation being conducted by the FBI, believed to be the largest in the nation’s defense contracting history.

Sources close to the investigation said the alleged warning, signs of which came to agents through a wiretap, took place before Lehman left office in April, 1987. But they emphasized that the information is, as one phrased it, “nothing close” to strong enough at this point for considering charges against Lehman.

A Terse ‘No Comment’

Henry E. Hudson, U.S. attorney in Alexandria, Va., who is heading the investigation, responded with a terse “no comment” when asked by Sen. Charles E. Grassley (R-Iowa) if Lehman was a target of the fast-developing federal inquiry.

Lehman refused to answer questions at his McLean, Va., home on Saturday, saying: “It would be inappropriate of me to comment on an ongoing investigation.” He said he would break his silence “after the investigation is completed.”

Lehman is of much interest to agents of the FBI and the Naval Investigative Service because of his relationship with Paisley, whom he personally recruited from Boeing Co. to serve as assistant secretary of the Navy. Paisley served in the Navy secretary’s office from 1981 to 1987.

The nationwide federal investigation, which involves private defense consultants, Pentagon officials and defense contractors, was made public last Tuesday as agents searched 38 offices and homes in an effort to find evidence of bribes and gratuities paid for disclosure of confidential contracting information. The information allegedly gave recipients a competitive edge in submitting bids for contracts.

Wiretaps in the investigation picked up one or more conversations in which participants indicated that Lehman had warned Paisley of the likelihood of his being recorded, sources familiar with the investigation said. According to federal court records, agents first sought the taps on Jan. 16, 1987, months before Lehman left office.

‘Lead’ Information

Lehman himself was not recorded, the sources said, and the tapped conversations are regarded only as “lead” information.

However, a heavily edited Defense Department report showed that former Defense Secretary 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 Lehman’s office.

Weinberger, in an interview Saturday with the Baltimore Sun, denied that he had received such a warning about Lehman’s office. Instead, he said he had been concerned about leaks from Lehman’s office concerning a classified Navy “operational matter or something of the sort”--not procurement contracts, the newspaper reported in today’s editions.

But the warning, reported by The Times and other publications in Saturday’s editions, was disclosed in official Pentagon documents subpoenaed in a fraud case, apparently unrelated to the current investigation and awaiting trial in federal court in Alexandria, Va.

In a development that one source close to the investigation called “a significant aspect” of the rapidly expanding probe, it was disclosed that a major jet engine manufacturer had apparently been leaked copies of confidential bid proposals that its chief rival had submitted to the Pentagon.

Search warrants served on Eugene Tallia, vice president and head of the Washington office of Pratt & Whitney, showed that the engine maker had obtained copies of General Electric Co.’s proposals on the F-404 engine for the F/A-18 fighter and the V-22 for the Navy’s Osprey tilt-rotor aircraft, according to a report in Defense Week magazine, which received a copy of the documents.

The FBI apparently is investigating how Pratt & Whitney obtained the highly sensitive documents, which would have included such guarded proprietary information as price and warranty guarantees, information of obvious value to a competitor.

The warrant also sought the appointment books and calendars of Tallia and any information about Tallia’s meetings since 1985 with either Paisley or his business partner, William Galvin. Additionally, it sought statements of work proposals, agreements, purchase orders, invoices, bills and correspondence.

‘Focuses on Relationship’

The Associated Press, which also reviewed a copy of the warrant, said it “focuses on the relationship” among Tallia, Paisley and Galvin. They could not be reached for comment.

According to Defense Week, General Electric was in fierce competition with Pratt & Whitney, a unit of defense giant United Technologies Corp., over the F-404 and V-22 engine contracts. The Naval Air Command picked the GE engine, but then-Navy Secretary Lehman overruled the choice and picked a third competitor--General Motors Corp.’s Allison Gas Turbine division.

“Pratt & Whitney is now in line to be the second source for the V-22 engine,” reported Defense Week, an industry publication.

A source told The Times that the alleged access of Pratt & Whitney to sensitive insider information on General Electric represents “a big part” of the sweeping probe of Pentagon leaks, bribery and defense contract fraud.

Search Warrant Served

The F/A-18 jet fighter is made by McDonnell Douglas in St. Louis, where another search warrant was served by the FBI last week. That warrant also requested documents and information linking top officials to Paisley and others in the Pentagon.

Sources familiar with the investigation refused to discuss how Lehman could have learned of the tapping of Paisley’s phone. Existence of the federal investigation was tightly held until it moved from the covert to the overt stage with the execution of the search warrants in 12 states last Tuesday.

Even Defense Secretary Frank C. Carlucci and Atty. Gen. Edwin Meese III learned of the investigation only in recent days. The decision not to brief Meese was made because of references to him and assistance he might provide in obtaining defense contracts on a wiretapped conversation, according to a source with knowledge of the recordings.

The material involving Meese did not produce any incriminating information, the source said. But because Meese has acknowledged that he had a role in assisting scandal-torn Wedtech Corp. to win a no-bid Army engine contract, the decision was made not to brief him on probably the most important Justice Department investigation conducted while he was in office, the source said.

Officials of the Naval Investigative Service, which initiated the investigation when a Defense Department official came to them with information about contracting payoffs, reportedly did brief James H. Webb, Lehman’s successor as Navy secretary. It could not be learned if they provided any information on the inquiry to Lehman.

Staff writer William J. Eaton in Washington contributed to this story.