In my early consulting days I got sent to an ex-Atari execs home and was told this exact story, although he said the final call was to just "give the whole thing away to the army" since internally Atari was so strongly against the endeavor on a political level.

Besides he said, "they could just have just taken it from us anyway".

I don't know if that was a comment on their contract terms or what but it was clearly an uncomfortable arrangement for Atari.