EDS Sued Over Alleged Purchasing Scam

FRAMINGHAM (03/09/2000) - Two electronics companies say that Electronic Data Systems Corp. drew them into a supposedly secret $120 billion NATO project that - after three years of work and millions of dollars spent - turned out to be nothing more than a scam.

Akai Musical Instruments Corp. and Pioneer New Media Technologies have filed lawsuits against Plano, Texas-based EDS. The suits, filed over the past two weeks, allege that EDS in early 1997 approached Akai and Pioneer to develop electronics equipment for a NATO procurement project that was so secret it would be paid for using "Black Hole Money," according to court documents. The companies were also required to sign nondisclosure documents.

Akai and Pioneer developed audio signaling and speech recognition equipment for the alleged security project and were required to provide the equipment for testing at no cost, according to the court documents.

Pioneer claims that it shipped $1.5 million worth of equipment to Rekem, Belgium, and spent 3,000 hours developing and producing the equipment. The address turned out to be a private residence, court documents stated.

Akai didn't list monetary damages, and a lawyer for the company refused to comment on the suit.

At least several other companies were involved in the scheme, but the lawyer for Pioneer said the extent of their involvement has yet to be determined.

"I've heard there are as many as 60 other companies involved," said Paul Smith, a lawyer representing Pioneer at Morrison & Foerster LLP in Irvine, Calif.

In a statement it issued yesterday, EDS claimed that it, too, was a victim of the scam. The statement said EDS was acting as a coordinator for the various bidding vendors when it discovered the scheme late last year and reported it to the FBI and other U.S. and international authorities.

EDS said the lawsuit won't affect its financial position. EDS spokesman Bill Ritz refused to comment further.

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