Unisys and whistle-blower face off in PC fraud lawsuit

A 2-year-old whistle-blower lawsuit, which alleges Unisys Corp. and Lockheed Martin
Corp. bilked the Navy on sales of custom PCs to the service, is poised for its day in
court--even though the government has never acknowledged that fraud occurred.

The U.S. District Court in Minneapolis recently agreed to hear the case, which a former
Unisys employee filed in January 1996.

Erik Gundacker, who had worked at Unisys' Eagan, Minn., office, claims that Unisys lied
to the Navy so the service would continue buying custom computers, although less expensive
commercial systems were available. Lockheed Martin is a party to the suit because it
bought the Minnesota facility from Unisys in 1996.

Unisys denied the charge. "Unisys is confident that there is no wrongdoing in this
case and that a judge or jury will conclude that this lawsuit has no merit," Unisys
spokeswoman Susan Beck said.

"The United States government did investigate the claims brought in this lawsuit
and elected not to participate in this action," Beck said. "Erik Gundacker has
raised essentially the same allegations in a civil action against Unisys, and the court
granted summary judgment for Unisys in that case in 1996."

Navy officials last week declined to comment on the case.

The "qui tam" lawsuit, in which a citizen sues on behalf of the government,
alleges that the Navy spent hundreds of millions of dollars more on the Unisys UYK-43 than
it had to. The UYK-43 is a proprietary system the Navy has used on ships and bases.

The Navy began buying the 32-bit UYK-43s in the 1980s. The lawsuit argues that the
service continues to buy the military-specification computers, even though commercial PCs
today are cheaper and more powerful.

"This lawsuit dates back to 1996, but it really is just beginning," said Dale
Nathan, Gundacker's lawyer.

In the complaint, Gundacker alleges that Unisys management ordered him and other
software engineers to lie to Navy officials about the cost and technical challenges of
replacing the UYK-43 with commercial systems. Gundacker said in the complaint that he
refused to mislead the Navy.

Gundacker alleges that Unisys purposely overcharged and falsified rates in contract
proposals as well as submitted false disclosures to the Navy.

The Defense Criminal Investigative Service and the Defense Contract Audit Agency also
suspected that Unisys committed fraud and began to pursue the complaints in December,
Nathan said.

"We have an open investigation on Unisys," DCIS special agent Bill
Christensen said.

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