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-- Stock manipulation. Veliotis has given the Justice Department a 1977 tape of a talk he had with MacDonald. In it, MacDonald told Veliotis that the company had decided to issue an overly optimistic delivery timetable for the + first Trident submarine because Lewis wanted "to keep our stock price from sliding." The sub was eventually finished in 1981, two years behind the original schedule.
-- National security violations. The Pentagon is looking into allegations of lax security at meetings of the General Dynamics board of directors, where top-secret subjects are supposedly discussed without adequate safeguards against leaks. Questions have been raised about how Veliotis, after leaving the company and losing his security clearance, obtained classified photographs of the interior of the newest Trident. Veliotis has turned over the sensitive pictures, which Soviet engineers could use to gauge the Trident's capabilities, to the Justice Department.
-- Questionable payments to foreigners. Representative Ron Wyden, an Oregon Democrat, asked Lewis last week about "a whole host of questionable payments being made overseas," including a $250,000 annual fee to a South Korean consultant. Lewis vehemently denied that the money was being funneled to the South Korean government as a bribe to win contracts for F-16 fighters. The chairman rejected a charge made by Veliotis that he had received permission from Lewis to go after contracts to sell natural-gas tankers to Burma and Indonesia by offering kickbacks of $1 million a ship. "I have absolutely no knowledge of that," Lewis said.
The most vivid example of the problems at General Dynamics can be seen in the decade-long controversy surrounding its work on the Navy's crucial nuclear-powered SSN 688 attack submarines. In 1971 the company won a contract for seven of the submarines with a bid of $61 million each. In an interview with TIME, Veliotis maintained that the bid was absurd from the beginning. Said he: "Electric Boat completely underestimated the difficulties and costs of building an entirely new sub."
The company quickly began to suffer cost overruns. Even so, in 1973 Electric Boat offered to build eleven more attack submarines for only $77 million each, which, adjusted for inflation, was roughly the same price as that of the first seven ships. Veliotis claims that General Dynamics' management knew it would never come close to the $77 million cost. The bid, he says, projected that it would take only about 4.5 million man-hours to build each sub, even though experience with the first set had shown that 6 million man-hours was more realistic.
In 1976 General Dynamics filed a claim with the Navy for $843 million in current and projected cost overruns on the attack-sub program. That worked out to a staggering $46 million surcharge on average for each of the 18 boats. The company contended that costs ballooned primarily because of design changes imposed by the Navy. But Veliotis says that most of the changes were requested by the company and that gross mismanagement was the real culprit. When he took over Electric Boat in 1977, he found the shipyard to be plagued by poor supervision, sluggish productivity and chronic absenteeism.