FOR IMMEDIATE RELEASE                                                   CIV
THURSDAY, DECEMBER 15, 1994                                  (202) 616-2765
                                                         TDD (202) 514-1888

           U.S. SETTLES FALSE CLAIMS ACT CASE AGAINST EQUIPMENT
             & SUPPLY INC. AND ESI PRESIDENT, ANDREW A. ADAMS

     WASHINGTON, D.C. -- Equipment & Supply Inc. of Monroe, North
Carolina, and the company's president and owner, Andrew A. Adams,
will pay the United States a settlement valued up to $1.4 million
to resolve allegations they sold aircraft parts and service
equipment to the Department of Defense that failed to meet
contract specifications, the Department of Justice announced
today.  
     Assistant Attorney General Frank Hunger, head of the Civil
Division, said that under the settlement ESI will pay the
government $750,000; withdraw its claim seeking $163,372.33 from
the Navy in another contract dispute; pay a balloon interest
payment at the treasury rate on today's settlement; and pay the
government up to an additional $500,000--contingent upon ESI's
gross sales in the next five years.
     The case was originally filed against ESI in U.S. District
Court in Philadelphia, Pennsylvania, as a qui tam false claims
lawsuit by a former ESI employee.  The qui tam provisions of the
False Claims Act permit a private citizen to file a suit on
behalf of the federal government and collect a portion of the
money if the government's action is successful.  
     In May 1994 the government filed an amended complaint to
intervene in the lawsuit and added Adams as a co-defendant.  The
government also alleged in its amended complaint that ESI paid
illegal kickbacks over a period of more than 10 years to former
Lockheed employee, Richard A. Pope, in violation of the Anti-
Kickback Act in order to obtain preferential treatment in
transactions involving a prime government contractor, Lockheed-
Georgia.  Shortly after, ESI and Adams filed for bankruptcy under
Chapter 11 in Charlotte, North Carolina.  The federal bankruptcy
court approved the settlement agreement on December 12, 1994. 
     ESI manufactured and sold aviation parts to many federal
agencies and commercial customers.  The government alleged that,
during the past 10 years, ESI fraudulently delivered more than
300 separate aircraft parts and service equipment that did not
meet contract specification requirements and provided falsified
test results to the government.  
     In January 1994, ESI pleaded guilty in federal court in
Charlotte to conspiracy and making false statements concerning
ESI's delivery of critical parts used in the United States Army's
UH-1 helicopter that ESI knew did not conform to government
contract specifications.  At the same time, the company pleaded
guilty to altering cure dates to conceal the original manufacture
date and age of rubber O-Rings in O-Ring replacement kits used on
aircraft and selling the kits in the commercial aviation market. 
ESI also pleaded guilty to altering test certifications for a
sling device used to cradle military aircraft engines on runways,
tarmacs, or aboard aircraft carriers and conspiring to pay
kickbacks to a former Lockheed employee.   
     On November 22, 1994, Pope was convicted of 25 counts of
conspiracy, kickbacks, and mail fraud involving his receipt of
gratuities from ESI in U.S. District Court in Atlanta, Georgia.
     The civil fraud case was investigated by the Defense
Criminal Investigative Service's office at Chapel Hill, North
Carolina, the Naval Criminal Investigative Service's office and
the Army's Criminal Investigative Command's Fraud Field Office at
Raleigh, NC, and the Air Force Office of Special Investigations,
Detachment 115 at Smyrna, Georgia.  Audit support was provided by
the Defense Contract Audit Agency's Eastern Regional Office at
Smyrna, Georgia.
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94-704