Lockheed unit is target of kickback probe

U.S. jury in Los Angeles subpoenas records on sales of radar systems

August 11, 1999|By John O'Dell | John O'Dell,LOS ANGELES TIMES

LOS ANGELES -- A unit of aerospace giant Lockheed Martin Corp. is the focus of a Los Angeles federal grand jury probe of possible long-term kickbacks involving sales of defense radar systems to foreign governments, according to a filing with the Securities and Exchange Commission.

Lockheed disclosed in a recent SEC filing that it received a federal subpoena July 15 seeking documents relating to the sales of radar systems by its New Hampshire-based Sanders unit in 1990.

Neither the company nor the U.S. attorney's office in Los Angeles would elaborate on Lockheed's disclosure in the Aug. 4 SEC filing.

But a source with knowledge of the subpoena's contents said the grand jury is seeking information that spans a much greater period -- involving sales that may have begun before Lockheed purchased Sanders in 1986 and that may have continued long past 1990.

The jury also wants to know if the alleged illegal commissions -- kickbacks paid a foreign agent in order to obtain a sale -- involved more than one client.

Officials at Bethesda-based Lockheed Martin "do not believe we have violated any laws or regulations, and we continue to cooperate fully with the U.S. attorney's office" in the probe, spokesman Lee Whitney said.

While U.S. defense companies have cleaned up their acts considerably in the 1990s, paying kickbacks was a widespread, although illegal, practice in the 1980s, when foreign governments were avidly purchasing aircraft and weaponry and bribes were sometimes the only way a vendor could get a foot in the door.

Litton Industries Inc. recently pleaded guilty to federal charges of conspiring to defraud the U.S. and Taiwanese governments by concealing more than $126 million in commissions paid to obtain shipbuilding contracts from the two governments.

Lockheed paid a then-record fine of $24.8 million in 1995 after pleading guilty to a charge of paying a $1 million bribe to a member of Egypt's Parliament in 1998 in return for her influence in helping Lockheed sell three C-130 Hercules transport planes to Egypt.

"There were a number of situations that developed in the go-go '80s," said John Kutler, president of Quarterdeck Investment Partners Inc., a Los Angeles defense consulting firm.

It was often done unknowingly, he said, as companies took an "I don't know about it and don't tell me about it" position.

"Nowadays, with government and military oversight, the controls are a lot more stringent and companies are extremely sensitive" to kickback arrangements, Kutler said. "I've seen many companies walk away from deals," he said, "because they just didn't smell right. It's a whole new world these days."

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