Lockheed Martin Space Systems has created fictitious losses on the sale
of some defense facilities in a scheme to reap tens of millions of dollars in
windfall profits at taxpayers' expense, Sen. Thomas Harkin, D-Iowa, alleges.
an interview and in a letter to the Defense Department, Harkin accused the space
systems unit of Lockheed Martin Corp. of using "an apparent accounting trick"
in an attempt to gouge taxpayers of perhaps $100 million. He cited three confidential
reports done by Pentagon auditors. He says they found that the unit's accounting
methods on the sale of facilities in California's Silicon Valley and elsewhere
were "flawed, unreasonable, and inequitable to the government."
Martin, the nation's largest defense contractor, says its actions are proper.
But, officials say, there is "an honest disagreement" between Pentagon auditors
and the company over accounting methods. "We are in negotiations with" Pentagon
auditors "about that disagreement," says James Fetig, chief spokesman for Lockheed
Martin, "and we are committed to reaching a mutually acceptable agreement on the
Lockheed Martin's space systems unit is based
in Denver. It has $5.5 billion in business with the Pentagon and NASA.
is a leading critic of wasteful defense spending. He says that the Pentagon paid
for improvements on the buildings, depreciation, and repair and maintenance expenses
under its defense contracts with Lockheed Martin. When the company sold the facilities,
however, it allocated all proceeds to the land and none to the buildings, Harkin
says. That meant the Pentagon could not receive any of the proceeds. Regulations
prohibit it from sharing in gains on land sales.
says Lockheed Martin considered the buildings worthless. He says it now is proposing
"to charge government contracts with over $95 million in losses for the supposedly
He says Pentagon auditors described
the losses as "fictitious." He says that the buildings were valued at millions
of dollars on tax rolls, that Lockheed Martin had made $22 million in improvements
on some facilities as late as 1999 and that it now "plans to lease back some of
the 'worthless' buildings at a cost of over $11 million." That expense will be
charged to its defense contracts, he says.
Martin maintains that the buildings had no value. Officials say various buyers
wanted only the land and have torn down the buildings or plan to do so. The buyers
are putting up new office facilities on the sites, Lockheed Martin says.
worries that the case is not unique, that other contractors may be attempting
to use the same scheme. Senior defense officials say they are taking the case
"very seriously" and plan to look into it.
© Copyright 2001 USA TODAY, a division of Gannett Co. Inc.