GENERAL DYNAMICS Corporation, a St. Louis, Missouri-based defense contractor, is alleged to have defrauded the U.S. government by inflating costs, understating profits, and committing contract fraud by offering kickbacks in connection with a 1970s-era shipbuilding contract.

In 1985, government prosecutors charged the firm with criminal fraud stemming from early development work for a U.S. Army air-defense gun system, known as the Division Air Defense weapon (Divad). The allegations combined to make General[Page 351] Dynamics into a symbol of the problems with military procurement.

In the late 1970s, the U.S. government offered a subsidy program to make American companies more competitive with foreign shipbuilders. The government later claimed that Quincy Shipbuilding division of General Dynamics fabricated an estimate that was designed solely for the purpose of winning an ...