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07332 00024 US 
Mail-from: Arpanet host SRI-KL rcvd at 5-NOV-80 1647-PST
Date:  5 Nov 1980 1646-PST
From: KAPLAN at SRI-KL
Subject: Re: BBN problems
To: Sweet at PARC-MAXC
In-Reply-To: Your message of 3-Nov-80 1402-PST

This note is going out to those that responded directly or or were cc'ed
about my note regarding the BBN article in the local paper.

1) I received a number of detailed replies from reliable sources
associated with BBN, who clarified the situation with the following
information:

Some office in BBN did some budget juggling, mainly with regard to
overhead funds, apparently for benign reasons. The Government objected.
BBN immediately corrected the situation. For some reason, criminal
charges were filed, and the company pleaded guilty rather than fight it
out.

2) The article here painted a considerably more dismal picture,
undoubtedly using the Government as the main source.

3) Absolutely no-one I talked to here (Stanford) had the slightest
inkling as to any of this previously, and all were concerned and anxious
to find out what was going on.

4) I have received messages from other people who saw the article in the
paper here and were outraged.

5) Apparently, the whole thing is common knowledge at BBN, and has been
for a long time. The tone of the notes that I received in response
seemed to indicate that people were getting a little tired of explaining
the whole thing whenever an article surfaces somewhere.

6) In light of the above, I intend to distribute a note summarizing this
info to let people know what the story is. (I got so much flack for
posting a long note on various bboards, that I will have to post a short
one with a pointer to this note.)

7) One person apparently took the message personally. Obviously, it was
not intended personally, nor was it intended to apply in any way to the
people that do the research around there, but rather at an independent
administration that may have been fouling things up. I certainly did not
intend to imply that I/we have any "higher" moral standards than at BBN,
and apologize if my tone seemed to the contrary. However, I don't feel
any personal responsibility for the warmongers that seem rampant in the
Hoover Institution here (for instance), but would surely expect BBN
people to be concerned if criminal charges were lodged against Stanford
that might badly reflect on the research community as a whole.

I would like to thank those that took the time to reply - it will help a
lot of people around here understand what is going on.

Perhaps the bottom line on this, as I noted in my note, is my feeling
that it may "cast a shadow" on the integrity of the entire research
community. My primary concern is that it might affect our research,
which has only a fragile insulation from politics as it is. According to
one message, it already has had an unfortunate effect at BBN, at least a
part of which is that the $500K "fine" will reduce overhead research
activities. 

Sincerely,

Jerry Kaplan

PS - From the descriptions I got of the situation, it seems to me that
all of our institutions are "sitting ducks" for this kind of treatment.
It may well come to pass, in these "scandal-oriented" times, that we are
all in for a lot of trouble - both from the government and the press - in
the future.
-------

PPS - 10/31 Here are some more reactions I have received (summarized and
sanitized of identification):

...My BBN sources tell me that BBN had already refunded $2M
to US Govm't, but that this was not deemed sufficient!
No info on what contracts were involved...

----------------
...I understand it the actual charges aren't nearly as horrendous as
you made it sound. Basicly it seems to have been more like mismanagment
than fraud. The two examples that I know of are:

The company finished up goverment contracts which were out of funds,
but charged the time to overhead rather than writing it down as a loss.

once when two of 4 divisions didn't have enough money left to put in
the retirement trust, the money from the other two was split between the
4, which for some complicated rules again involving overhead was illegal.

In any case BBN paid the sums back several years ago when this all
started...

----------

...The term "budget juggling" covers an awful lot of
territory.  From one former BBN employee I gathered that the problem
was with administrators retroactively altering time sheets, with the
result that employees are now required to fill them in DAILY and
in ink.  It's hard to say whether this is immoral or illegal without
knowing more about it.  While it sounds bad, time reporting is often
a matter of interpretation, especially with regard to what is
overhead and what is not...


-------------

...As you probably know by now,
we have been under extreme scrutiny for two and a half years, so in a
sense, this thing has affected us already for quite a while.  I wouldn't
worry about any shadows on the research community; if you recall, people
like Proxmire have been insensitive to research for quite a long time,
and we've all managed to survive.  The other real irony is that
apparently Luciano and Kirsch were, at least originally, trying their
best to help the BBN employees with our retirement trust (by evening out
the contributions from different divisions - NOT by over- charging) and
the government by working on contracts after the money had run out (in
effect, giving them more than their money's worth).  I guess that they
didn't realize (or didn't think it mattered) that improving one
division's overhead situation from another's success actually jacked up
the overhead price on the more successful one.  I'm sure that there is
more to the story, but from what I can tell, that's the major thrust of
it...

---------
...I was a member of the BBN staff from  75 thru 79 and I was personally aware
of the practices which appear to be the cause of the current situation.
There were times when work on one contract was charged to another
contract or to overhead. This was almost always done in the interest of
getting the best (or at least most interesting) work done on all
contracts.  At the time it seemed like the government was actually
getting some extra work on contracts where there wasnt enough money to
get the work done, and the feeling was that groups helped each other out
so that the general quality of work done by BBN on contracts would
always be high.  Another feeling was that the practices, while illegal,
were common among govbernment contractors, and were beneficial to both
the government and the company.  What I have said is applicable to the
technical staff at least at the lower levels.  Obviously I have no idea
what was going on in the higher levels of financial management, although
I suspect that those were not much more odious.  Two comments come to
mind. First, as you (or someone you quote) said, other government
contractors are probably wide open to the same sort of prosecution.
Second, the original subpoena for documents for the investigation came
(as I recall) shortly after the release of results of analysis of the
Dallas tapes for the assasination hearings.  Probably coincidence, but I
wouldnt be surprised if the BBN management would be reluctant to take on
more contracts of such a politically charged nature. Wouldn't you?...
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00445 00024 US 
Date: 3 Nov 1980 14:02 PST
From: Sweet at PARC-MAXC
Subject: BBN problems
To: KAPLAN at SRI-KL
cc: Sweet

I have watched with interest some messages from you forwarded by someone a
PARC.  If you have a smaller distribution list of interested parties, I would like
to be on it.  My wife is involved with indirect recovery at Stanford and I think
she would be interested in more details if possible.  Thanks.

Dick Sweet