Ex-Rockwell Official Pleads Guilty to Fraud : Defense: The manager set up a phony machine shop to win a subcontract. He then did business in a non-approved shop and pocketed the difference.

A former Rockwell International Corp. purchasing supervisor pleaded guilty Thursday in federal court in Los Angeles to mail fraud and conspiracy to receive kickbacks in connection with a scheme to defraud the defense contractor on the B-1B bomber program.

Ralph Affinito, 49, of Rancho Palos Verdes, pleaded guilty to secretly setting up a sham machine shop in an effort to obtain subcontracts from Rockwell, where he was working as a supervisor in the parts purchasing department in El Segundo.

Affinito admitted to U.S. District Judge Terry J. Hatter Jr. that he and a friend, Ward Finch, set up the phony machine shop, and Affinito provided Finch with information that enabled him to make successful bids for the subcontracting jobs.

Finch, in turn, subcontracted the actual work to unapproved machine shops. The scheme cost Rockwell more than $430,000, according to Assistant U.S. Atty. John F. Walsh III, who prosecuted the case with the help of investigators from the Federal Bureau of Investigation and the Internal Revenue Service.

Affinito is the 19th person to plead guilty to a felony uncovered during a multi-agency investigation of kickbacks in defense subcontracting. The probe is called DEFCON.

Walsh said Affinito set up the sham machine shop, called Draw Industries, with Finch, a real estate broker, in 1982. The prosecutor said Affinito doctored files to make it appear that a competitive bidding process had taken place when, in reality, the defendant had simply awarded the work to Draw at an inflated price.

Affinito and Finch pocketed the difference between the inflated price paid by Rockwell and a cut-rate price charged by the real, though unapproved, machine shops.

If the scheme had not been discovered, said Carlos Torres, an IRS investigator, it could have cost Rockwell “millions of dollars.”

FBI agent Dale Bibel said that, although no work was done by Draw Industries, a building was rented, machines obtained, time cards displayed, metal shavings strewn on a floor and temporary phony employees procured to deceive Rockwell officials when they came to examine Draw Industries.

Most of the DEFCON cases were prosecuted in 1986 and 1987. The case against Affinito is only being resolved now, Walsh said, because it has a convoluted procedural history.

Originally, Affinito went to trial in 1987 on an indictment charging him with the Draw Industries scheme and a separate kickback scheme at Hughes Aircraft. He was acquitted on the Hughes charges but convicted of the Draw scheme.

Just a few weeks after the trial, however, the U.S. Supreme Court issued an opinion that struck down a number of mail-fraud convictions, including Affinito’s.