THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Thursday, September 29, 1994 TAG: 9409290428
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY MARC DAVIS, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: Medium: 72 lines
The Navy did a sudden about-face Wednesday, announcing it has stopped debarment proceedings against Computer Dynamics Inc. and company chief Robert L. Starer.
Just two weeks ago, the Navy announced it would debar - or ban - the Virginia Beach-based company from all future government work.
On Wednesday, the Navy repeated its finding that Computer Dynamics and Starer hid an employment contract with company founder R. Alan Fuentes after his 1992 criminal conviction.
But the Navy also found that the company had strengthened its internal ethics program, and had never honored Fuentes' employment contract.
This is ``great mitigation'' in the company's favor, the Navy ruled, and therefore Computer Dynamics and Starer should not be debarred.
For Computer Dynamics, also known as CDI, the reversal comes just in the nick of time.
If the Navy had not reversed itself, the company would have been ineligible for all government work on Saturday, the start of the federal fiscal year, when many contracts begin.
Computer Dynamics would have lost $14 million in work, and might have laid off more than 180 of its 450 employees and closed its Career Education Center, with about 800 students, the company said.
``There is generally a feeling of relief here,'' Starer said after the announcement.
On Monday, Computer Dynamicssued the Navy in Norfolk's federal court, seeking a temporary injunction to stop the Navy's debarment.
On Tuesday, the case was scheduled for a hearing, but it was postponed at the last minute. Late Tuesday, the Navy told Computer Dynamics and Starer it would stop the debarment. Official notice came Wednesday morning.
In its lawsuit, Computer Dynamics claimed that the proposed debarment had ``immediate and devastating effects'' on the company. News of the debarment prompted ``various agencies'' to cancel contracts, purchase orders and delivery orders, even before the debarment was official, the lawsuit claimed.
Computer Dynamics provides computer sales, services and training. Until a few years ago, it relied almost entirely on military contracts. It is shifting toward continuing education and private work. Only one-third of the company's work is now for the government.
The company has annual revenues of $30 million to $40 million, and employs 400 to 500 people.
Starer blamed Fuentes for triggering the Navy's latest investigation.
``There's a feeling here, how many times do we have to put up with the Alan Fuentes thing?'' Starer said. ``That shows such lack of caring (by Fuentes) for the almost-500 people who work here.''
Underlying the Navy's investigation was a running feud between Fuentes, who founded the company in 1977, and Starer, whom Fuentes brought in to run the company in 1991.
The two men had a falling out after 1992, when Fuentes and the company pleaded guilty to federal conspiracy charges. Both were fined, and Fuentes was forced to leave the company so it could keep its government contracts. He did, however, keep his company stock.
Soon after, Starer became majority stockholder. As a result, Fuentes sued Computer Dynamics and Starer to win back control of the company.
The Navy's action Wednesday will not affect Fuentes' own proposed debarment, which began at the same time as Computer Dynamics' and Starer's.
But Fuentes said Wednesday that he will use the Navy's latest decision as a jumping-off point to challenge his own debarment.
``They debarred us for exactly the same thing,'' Fuentes said. ``So I'm going to use the same evidence they (the company and Starer) used to get themselves off.'' by CNB