Genisco Must Pay $725,000 for Fake Military Test Data

November 08, 1988 KIM MURPHY L.A. Times Staff Writer

Genisco Technology Corp. was ordered Monday to pay $725,000 in fines and restitution for falsifying test data on several key military components, including a U.S. Navy torpedo simulator.

Under the settlement, $131,250 will go to a former Genisco engineer who lost his job after he reported the fraud in what is believed to be the first private settlement ever paid under the 2-year-old federal whistle-blower statute.

Genisco, a Rancho Dominguez aerospace company, pleaded guilty last month to charges that it falsely certified test results for small but critical components, known as pressure transducers, which the company supplied for a variety of military guidance systems.

HARM Missile Involved

The parts covered in the guilty plea were supplied to the Navy's mobile underwater target device and a Navy torpedo simulator. But the original indictment also charged the company with falsely certifying transducers for the HARM missile, an allegation that prosecutors said forced several of the missiles to be recalled from strategic locations around the world.

Much of the government's case against the company was developed with information supplied by four Genisco employees, one of whom filed a federal whistle-blower lawsuit on behalf of the government and who will now receive a share of the settlement proceeds as a result, said Assistant U.S. Atty. David Katz, who prosecuted the case.

The employee, Roland Gibeault, was the first employee who still worked for Genisco to meet with investigators for the FBI and the Defense Criminal Investigative Service, Katz said.

Gibeault was laid off from his job two days after the government disclosed Gibeault's identity to Genisco, as was required because of the criminal indictment subsequently returned against the company.

"I'm not saying there was a connection," Katz said. "Genisco has said there was no connection. But that's certainly curious timing, that two days after they've realized just how devastating the evidence that was coming in from Gibeault was, he gets laid off."

The settlement calls for Gibeault to receive 25% of the $525,000 in restitution the company agreed to pay as settlement of all criminal charges and civil claims. The company also agreed to pay $200,000 in fines for its guilty plea to four criminal counts.

Cheaper Than a Trial

Meeting with reporters after the sentencing hearing before U.S. District Judge A. Andrew Hauk, company president Phillip Friedman said Genisco agreed to plead guilty and pay the settlement because it would be cheaper than taking the case to trial.

"I remain convinced that we were not guilty in this case," Friedman said. "I'm convinced that none of our executive officers knew about the situation. It was solely the activities of two or three ex-affiliates in a division that was 60 miles away from headquarters. We settled the matter to get it behind us and to allow the company to move forward."

But Katz criticized the assertions that Genisco is innocent.

"I think it's outrageous to imply that the corporation wasn't guilty when Genisco's own attorneys got up at the hearing on the (guilty) plea and said that they concurred with the factual basis presented by the government and agreed that Genisco should plead guilty because it was guilty," the prosecutor said. "A federal court won't accept a guilty plea from someone who says they are not guilty."

Gibeault's attorney, Robert Kilborne, called the settlement "a major victory," although his law firm was forced to waive its fees to negotiate the payment.

"I think . . . it shows the rest of the whistle-blowers across the country that there is an answer in the whistle-blower statute," he said.

The three employees--Werner Brinkschulte, Danny K. Evans and Robert L. Kersnick--who were also charged in the indictment with carrying out the test falsifications have all been fired, Friedman said. All three have pleaded guilty to making false statements and conspiracy and are scheduled for sentencing Nov. 21.

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