Why Lockheed Martin’s Latest Settlement is Unlikely To Be Its Last
Lockheed Martin Corporation is the top defense contractor worldwide. Each year, it wins accolades for groundbreaking innovation and consistently impressive revenue.
It is also one of the worst repeat offenders of federal fraud. Yet, each year, it wins the highest grossing federal contracts out of any other corporation in the country.
In March 2016, Lockheed Martin paid $5 million to settle allegations of environmental fraud and False Claims Act (FCA) violations. It may be the most recent settlement for Lockheed, but it’s hardly the first time the company has been accused of misusing taxpayer dollars.
The settlement is yet another piece of a larger puzzle illustrating the unbridled fraud and waste that plagues the defense industry.
From 1984 to 1999, Lockheed Martin ran The Paducah Gaseous Diffusion Plant in Kentucky. The plant produced enriched uranium, which is used for both nuclear power and nuclear weapons. The plant’s operators were required to properly dispose of hazardous waste as per the Resource Conservation and Recovery Act (RCRA.)
Two whistleblowers alleged that Lockheed Martin violated the RCRA on multiple occasions, potentially causing unnecessary and harmful environmental impact. Submitting invoices for federally subsidized services without adhering to the required environmental protocol is a FCA violation.
Lockheed agreed to pay a $5 million settlement, and the whistleblowers who reported the alleged FCA violations will receive $920,000.
A $5 million settlement is better than nothing, but for a company that makes over $45 billion per year, it may not be enough of a deterrent.
The Birth of Lockheed Martin
Lockheed Martin has been sued for federal misconduct 81 times in the past 21 years. Given the scope of the services it continues to provide to the U.S. government, that is quite a troubling record.
There’s no question that Lockheed Martin excels at innovating in the security, technology, aerospace and defense arenas, however its excellence should not serve as a pass for egregious abuse of taxpayer funds.
The company’s services have become indispensable to U.S. military operations, as well to many civil services such as energy operations and information technology.
Lockheed Martin is the product of a merger between two originally separate companies: Lockheed Corporation and Martin Marietta Corporation. This merger was not an anomaly, though it was significant.
In the mid-90’s, the world’s most powerful defense companies underwent a series of similar mergers, which ultimately altered the landscape of the defense industry — and the military industrial complex.
Since then, Lockheed Martin has become so powerful and pervasive that, like many financial institutions, it has been ascribed the adage “Too Big To Fail.”
A Long and Lucrative History of Fraud
Lockheed Martin’s enormous presence in the defense industry is not an accident, nor is it simply the organic result of the company’s innovative product and service offerings.
For the past several years, Lockheed Martin has spent around $15 million annually on lobbying, the controversial practice that allows private corporations to influence legislation and other federal decisions. Though lobbying is generally legal, lobbying with taxpayer dollars is not.
Lockheed competes with other large defense companies for federal contracts each year. In 2015, the company’s subsidiary Sandia was accused of billing the government for lobbying funds, which were reportedly used to win a $2.4 billion per year nuclear lab contract.
Sandia allegedly paid an infamously corrupt ex-government official $10,000 per month to facilitate the scheme, and subsequently requested federal reimbursement for what were actually lobbying expenses.
Everything about these allegations indicates very serious illegal activity, including bribery, False Claims Act violations, and unlawful suppression of competition. Lockheed Martin paid just over $4.7 million to settle the allegations. Company representatives attempted to defend the alleged FCA violations by claiming that they may not have fully understood their legal obligations.
It seems unlikely that one of the most powerful companies in the world would somehow be unaware of basic legislation. Intent notwithstanding, the influence Lockheed Martin allegedly buys every year has allowed it to continue operating after having to answer for other misdeeds, including:
- A $19.5 million settlement in 2013 for allegedly misleading investors and overstating its financial projections.
- A $28.4 million penalty in 1995 for violating the Foreign Corrupt Practices Act (FCPA) by bribing an Egyptian government official.
- A $15.85 million settlement in 2012 for allegedly overcharging the government for military aircraft tools.
- A $27.5 million settlement in 2015 for allegedly overcharging the government for services performed by unqualified or under-qualified professionals.
- A $67 million settlement in 1996 for allegedly causing severe pollution in Burbank groundwater, resulting in environmental damage and the illnesses of local residents.
Again, those cases represent only 5 out of at least 81 instances of alleged misconduct and admitted fraud.
Can Anything Be Done?
Lockheed Martin may be one of the most powerful repeat offenders of federal fraud, but it is hardly alone. The misconduct of the defense contractor industry as a whole raises important questions about whether and how corporations with that much power can be held accountable.
At the very least, it is critical that the American public has greater awareness of how often their tax dollars are being misused by defense contractors. When corporations rely on your taxes to function, they ultimately work for you — and you have the right to hold them accountable.
It is also important that those who work in the defense industry know their rights when it comes to reporting fraud. The top defense companies can be extremely intimidating, but the fact remains that the False Claims Act protects defense whistleblowers that report the misconduct of federal contractors.
If a defense contractor attempts to suppress legitimate complaints or retaliate against whistleblowers that report misconduct through appropriate channels, it is breaking the law.
When Lockheed Martin faces legal trouble, it often draws attention to the many jobs that it creates throughout the country, and how essential it is to U.S. military operations. Both of these statements are true, but both of these statements mean that Lockheed has a tremendous responsibility to the American public and to the military itself.
It has a responsibility to act with integrity and to put at least as much effort into the lawful use of taxpayer funding as it does into innovation. When it fails to do so, whistleblowers have the right to raise the alarm, and taxpayers have the right to demand accountability.