By Philip Mattera
Lockheed Martin’s slogan is “we never forget who we’re working for.” That’s not difficult, given that the company receives more than 80 percent of its revenue from the U.S. government, mostly the Pentagon. Formed by the 1995 “merger of equals” of two major aerospace companies—Lockheed and Martin Marietta—it is the largest federal contractor and the largest weapons producer in the world. Lockheed, which had to be bailed out by the federal government in the 1970s, has been involved in numerous controversies involving questionable foreign payments, cost-overruns, overbilling of the federal government, race and age discrimination, and environmental racism. The Project On Government Oversight’s Federal Contractor Misconduct Database has 58 entries for Lockheed involving more than $600 million in fines, damages and other payments.
In March 1998 Lockheed and Unisys agreed to pay $3.15 million to settle charges of artificially inflating prices of spare parts sold to the Commerce Department for the NEXRAD Doppler Radar System.
In June 2000 the State Department fined Lockheed $13 million ($5 million of which was to pay for remedial measures) for violations of the Arms Control Export Act in connection with the transfer of information about space launches to China.
In August 2002 Lockheed’s Tactical Systems Division agreed to pay the federal government $2.1 million to settle charges that it submitted fraudulent bills to the Navy for work on Trident Missiles.
In January 2003 Lockheed agreed to pay $1.4 million to settle allegations that Loral Corp., which it acquired in 1996, had overbilled the Air Force on the F-15E Weapon System Trainer.
In June 2003 Lockheed paid $7.1 million to settle charges that one of its units submitted fraudulent lease cost claims to NASA, for which it was doing work on the space shuttle program.
In August 2003, Lockheed agreed to pay $37.9 million to settle charges that it inflated costs in several contracts for the U.S. Air Force.
In January 2005 Lockheed Martin Missiles and Fire Control agreed to pay $1.4 million to resolve allegations of mischarging the U.S. Army in connection with its production and support contracts for the Multiple Launch Rocket System.
In 2007 Lockheed agreed to repay the federal government $265 million plus interest in connection with overbilling for work on the F-35 Joint Strike Fighter. The company called the overbilling “inadvertent.”
A February 20008 U.S. Government Accountability Office report singled out Lockheed’s F-22A fighter plane in a review of weapons systems plagued by large cost overruns, delays and quality problems. (The following year the Senate voted to terminate the F-22 program.)
In June 2008 the Project On Government Oversight made public a 2007 report by the Defense Contract Management Agency that found Lockheed failed to follow 19 of 32 Pentagon guidelines on tracking and managing costs on major weapons programs.
In August 2008 Lockheed agreed to pay $4 million to settle charges that it failed to get permission to sell missiles to the United Arab Emirates and that the company revealed classified information during negotiations with the Persian Gulf nation.
In 2009 the Pentagon said that Lockheed would have to pay part of the huge cost overruns on the delay-ridden F-35 fighter jet project.
In December 2010 Lockheed agreed to pay $10.28 million to resolve federal charges that it overbilled the Air Force and the Navy for the C-27J tactical aircraft.
In January 2011 Lockheed agreed to pay $2 million to settle allegations brought in a whistleblower case that it and SAIC conspired to obtain non-public information in connection with a contract competition for work at the Naval Oceanographic Office Major Shared Resource Center in Mississippi.
In March 2012 Lockheed agreed to pay $15.85 million to settle allegations that it overcharged the Pentagon for tools used on military aircraft programs.
Bribery and Questionable Payments
During the mid-1970s, prior to its merger with Martin Marietta, Lockheed Corp. was embroiled in a high-profile controversy over payoffs the company had made to foreign officials, including the Japanese prime minister, Prince Bernhard of the Netherlands and a cabinet official in Italy. The scandal started as an offshoot of the Watergate case but became a central part of the investigation of international corporate bribery led by Senator Frank Church. In 1977 a report prepared by outside directors at the company found that, from 1970 to 1975 alone, Lockheed executives had made up to $38 million in questionable payments.
The payoff issue would come to haunt the company again in later years. In 1995 Lockheed agreed to plead guilty to one count of violating the Foreign Corrupt Practices Act in connection with payments made by a company consultant to a member of the Egyptian parliament. It paid a fine of $28.4 million.
Environment and Product safety
Lockheed’s former airplane assembly plant in Burbank, California was the subject of a 1991 consent decree with the Environmental Protection Agency under which the company agreed to remediate contaminated groundwater at the site. In 1996 the company agreed to pay $67 million to settle damage suits that had been brought by residents of the area. A subsequent suit brought by Burbank residents was settled by Lockheed for $5 million in 2000.
Residents of the village of Tallevast in Florida’s Manatee County accused Lockheed Martin of environmental racism for failing to notify them that a facility the company purchased in 2000 was leaking toxic beryllium into water wells in the area. The facility was previously owned by American Beryllium Company, which produced parts for nuclear reactors and weapons systems. The residents challenged the Lockheed’s remediation plan, upset that the company estimated it would take 50 years to clean-up ground water in the area.
In July 2008 Lockheed filed suit against the federal government, arguing that taxpayers rather than the company should pay cleanup costs, expected to be in the tens of millions of dollars or more, at facilities where U.S. military and space rockets were produced and tested.
Lockheed has been involved in numerous cases in which the company was sued for employment discrimination, especially relating to race and age. For example, in 1996 the company agreed to pay more than $13 million to settle an age discrimination case brought by the U.S. Equal Employment Opportunity Commission on behalf of more than 2,000 former workers. The company also agreed to rehire 450 other older workers. The case was originally filed in 1994 against Martin Marietta before its merger with Lockheed.
In January 2008 Lockheed agreed to pay $2.5 million to a former avionics electrician at the company who said he had been subjected to racial epithets and other forms of intimidation by co-workers and a supervisor. It was the largest amount ever obtained by the EEOC for a single person in a racial discrimination case.
In April 2008 the EEOC announced that Lockheed Martin Global Telecommunications would pay $773,000 to settle an age discrimination case that had been filed against the company by eight older workers.
About 15 percent of Lockheed’s workers are covered by collective bargaining agreements. The main unions involved are the International Association of Machinists (IAM), the International Union of Electronic Workers (IUE)-Communications Workers of America, and the United Auto Workers. IAM members at a company facility in Marietta, Georgia struck the company for seven weeks in 2002 and one week in 2005. Machinists at a Fort Worth, Texas plant carried out a two-week walkout in 2003.
The Fort Worth Machinists began another strike in April 2012 after rejecting what the company called its final offer on a new contract. Two months later, the company began hiring replacement workers. The walkout ended in July 2012 after union members accepted a new offer in which Lockheed sweetened its wage package but held fast to its plan to replace a defined-benefit pension plan with a 401(k) for new hires.
Other Information Sources
Violation Tracker summary page
Watchdog Groups and Campaigns
Key Books and Reports
American Arms Supermarket by Michael Klare (University of Texas, 1984)
Prophets of War: Lockheed Martin and the Making of the Military-Industrial Complex by William D. Hartung (Nation Books, 2010).
The Arms Bazaar by Anthony Sampson (Viking Press, 1977)
The Iron Triangle: The Politics of Defense Contracting by Gordon Adams (Council on Economic Priorities, 1981)
The Politics of Contracting (Project On Government Oversight, June 2004).
Note: This page draws from a corporate profile originally prepared by the author for the Crocodyl website in August 2008.
Last updated September 18, 2012.