Probe Scuttled

It was a marathon effort: federal investigators had sifted for three years through 45,000 documents and grilled more than 120 witnesses. But only a four- page press release was needed last week to scuttle the Justice Department's inquiry into charges that General Dynamics had falsified information in the 1970s about delivery dates and multimillion-dollar cost overruns on Trident and Los Angeles-class nuclear submarines. Citing the "absence of any reasonable prospect of a successful prosecution," the Justice Department dropped its investigation into the actions of employees of the firm, including then Chairman David Lewis, 69. Said Deputy Assistant Attorney General Victoria Toensing: "The evidence was analyzed by nine career prosecutors, all of whom concluded that prosecution should not be initiated."

Not for lack of trying. The probe dates back to 1979, when a federal grand jury began hearings into allegations of rip-offs in the $1.8 billion contract for subs by General Dynamics and its Electric Boat division. After two years the jury disbanded. In 1984 investigations revived when P. Takis Veliotis, the boat division's former general manager, who had fled to Greece to avoid prosecution for an unrelated kickback scheme, said he had tape-recorded conversations with Chairman Lewis and Vice President Gorden MacDonald, both since retired. The tapes purportedly showed an agreement to provide false data to the Government. But Government lawyers turned down Veliotis' plea for % immunity on the kickback charges, and the investigation wore on until last week without the cooperation of a key player.

Twice in 1985 General Dynamics was suspended, then reinstated, as a defense contractor after investigators found instances of bill padding. Through it all the defense conglomerate, which manufactures F-16 fighters and M-1 tanks, among other things, has prospered. From 1984 to 1986, sales increased by nearly 15%, to $8.9 billion. During that period, General Dynamics eclipsed McDonnell Douglas as the nation's No. 1 defense contractor.

Last week a General Dynamics spokesman declared that the company can now turn to the "more normal activities of managing the business." But maybe not. Senators William Proxmire of Wisconsin and Charles Grassley of Iowa have demanded all memorandums and correspondence from the General Dynamics probe for their own inquiry. Grumbled Grassley: "It is abundantly clear we do not have efficient and effective enforcement against defense fraud."