Lawmaker seeks documents on Pentagon-Lockheed deal $31 million in bonuses to executives is opposed

September 25, 1995|By NEWSDAY

WASHINGTON -- The leader of a congressional effort to block a Clinton administration payment of $31 million in executive bonuses for Lockheed Martin Corp. has asked the Pentagon for key documents that would justify the windfall for the nation's largest defense contractor.

Rep. Bernard Sanders, a Vermont independent, asked the Defense Department's inspector general to provide Congress with executive agreements between the company and the Pentagon that permit use of taxpayer money to help finance $92 million in payments the executives gave themselves for completing the merger of Lockheed Corp. and Martin Marietta Corp.

Mr. Sanders' request reflects growing suspicion in Congress and among some Pentagon auditors that the $31 million payment may violate defense regulations, which specifically prohibit reimbursing costs associated with a change in management. Earlier this month the House approved Mr. Sanders' amendment to stop the Pentagon payment. But the provision was unlikely to survive a House-Senate conference on the defense appropriations bill, according to congressional sources.

"Since one-third of the payments are to be provided from public funds, the executive agreements are public documents," Mr. Sanders wrote Inspector General Eleanor Hill.

Ms. Hill's deputy, Derek Vander Schaaf, is monitoring a Pentagon audit of the bonus package. He declined Newsday's requests to discuss the issue.

Major stockholders objected to the $92 million bonus package that primarily went to Martin Marietta chief Norman Augustine and 439 other executives.

But the one-time, lump-sum payment was the result of an anti-takeover provision adopted by Martin Marietta after an abortive hostile acquisition attempt in 1982 by Bendix Corp. A proxy statement the firm filed with the Securities and Exchange Commission showed the bonuses were triggered by "a change of control" at Martin-Marietta resulting from the merger.

However, Pentagon regulations governing defense contracts forbid using public funds to cover such payments. "Costs incurred in making any payment (commonly known as a 'golden parachute') which is paid to the employee contingent upon, and following a change in management control," are not allowable, according to Federal Acquisition Regulation 2324.

In addition to the prohibition, Pentagon veterans said the $31 million payment violates important defense contracting precedents.

"We do pay bonuses, but only as an incentive for meeting production goals or other achievements that save taxpayer money," said a senior Air Force official who asked not to be identified. "That's not the case in this $31 million deal."

Defense Secretary William J. Perry has defended the Pentagon's share of the bonus package, arguing that it was money that would have been paid to Martin Marietta even if a merger had not occurred. Mr. Perry has favored defense contractor mergers as a means of reducing defense spending by cutting overhead costs.

Mr. Augustine got $8.2 million as a bonus. Members of the board of directors who received bonuses included Lamar Alexander, a Republican presidential candidate, $236,000; former Defense Secretary Melvin R. Laird, $1.6 million; and retired Army Gen. John W. Vessey, former chairman of the Joint Chiefs of Staff, $372,000.

Two months after Mr. Augustine and the other executives received the bonuses, Lockheed Martin fired 19,000 workers in 12 states.

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