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For a decade, critics have charged that the actions of General Dynamics exemplify the greed and mismanagement they think pervades the defense industry. A federal grand jury first started investigating the company's cost overruns on submarines in 1979, but dropped the probe in 1981 for lack of enough evidence of fraud. Now the Justice Department has reopened the case in light of new information from P. Takis Veliotis, who in 1977 became head of Electric Boat, the company's sub-building division in Groton, Conn. His word is hardly unimpeachable. In 1983 he fled to his native Greece to avoid being tried on charges of perjuring himself before a grand jury and taking $1.3 million in kickbacks from a subcontractor (see box). Veliotis has produced tapes and company documents that he claims reveal a pattern of waste, corruption and cover-up at General Dynamics. In a tape of one talk he had with Lewis, for example, the chairman suggests that Veliotis reassure James Ashton, a discontented Electric Boat executive, that he is still in the running for a promotion in order to keep him from "popping off" about shoddy work at the yard.
Lewis maintains that Veliotis' tapes are unreliable evidence and his accusations merely a personal vendetta against his old bosses. Said the chairman to the Dingell committee: "It is incomprehensible that the word of Veliotis, indicted for lying under oath, has been so eagerly accepted by newsmen and investigators, while accurate explanations given by General Dynamics people have been largely ignored."
The charges that Veliotis and investigators have made against the company, none yet proved in court, constitute a catalog of almost every type of chicanery that critics say is rampant in the defense industry. Among the allegations:
-- Dubious Government billings. In 1982 alone, General Dynamics asked the Pentagon to pay $18.9 million in overhead costs run up by company headquarters. Among the charges: $491,840 for Lewis' personal flights on corporate jets, often to and from his farm in Albany, Ga.; $538,781 for contributions and memberships, including country-club fees for top executives; and $155 for the kenneling of a dog named Fursten while its owner, a General Dynamics executive, attended a company conference at a South Carolina resort. At last week's hearing, Dingell quizzed Lewis about a $571.25 charge for a king-size Serta Perfect Sleeper mattress and box-spring set, which was delivered to the Clayton Inn in suburban St. Louis. "It was for Mr. Veliotis," said Lewis, who explained that the executive said he needed the bed for the times he came to St. Louis for meetings. Added Gorden MacDonald, a General Dynamics executive vice president: "Mr. Veliotis, being a very large man, complained so much to the secretary of the company that he got tired of hearing it and bought the bed." Veliotis denied that the bed was for him.
-- Questionable entertainment and gifts. In 1982 General Dynamics headquarters maintained a $1.24 million account, which was used, against Government rules, to entertain Pentagon officials. Gifts have flowed freely. In 1977 General Dynamics gave a pair of diamond earrings worth $1,125 to the wife of Admiral Hyman Rickover, who until 1981 headed the Navy's nuclear-propulsion program. The company argues that the gift was made with no "intent" to get favors in return.