Taxpayers to Pick Up Tab for Lockheed Settlement : Health: The firm says it will charge the government and other customers for $33 million in payments for toxic exposure claims by workers in Burbank.
Lockheed Corp. plans to recover from taxpayers most of its $33-million settlement of toxic exposure claims by workers at its Burbank production complex, a company official said.
The aerospace and defense giant, which admitted no liability last summer when it settled claims by 624 workers, plans to recover most of the money through charges in its government contracts, said Lockheed spokesman Keith Mordoff. The workers said they had suffered a variety of injuries from exposure to toxic chemicals during production of Stealth fighters and other military aircraft in the 1970s and 1980s.
Lockheed will apportion the settlement cost among its customers as is the normal practice, Mordoff said in response to an inquiry by The Times. Since the Department of Defense and other federal agencies account for more than 80% of Lockheed’s sales, Lockheed charges them that share of costs through pricing of its hardware and services.
Mordoff called the settlement “a legitimate cost of doing business,†adding that “such costs are allocated to all of our customers--not just the government.â€
A public information officer for the Defense Department’s Defense Contract Management District West in El Segundo said officials there couldn’t comment on an expense claim they have not seen.
“As far as we know, there has been no discussion or correspondence on the subject,†said spokeswoman Gay Maund. “We have to see if we get anything, and we have to see what it says.â€
Although terms of the settlement in June, 1992, were to remain secret by agreement between Lockheed and other parties in the case, The Times learned that Lockheed agreed to pay $33 million to get the workers to dismiss their claims. The company put up another $300,000 so a private judicial panel could distribute the funds among the workers--whose health complaints ranged from minor problems to such maladies as memory loss and cancer.
With Lockheed dismissed, the case proceeded against more than 20 chemical firms that supplied solvents, resins and epoxies used in making aircraft and allegedly failed to provide adequate warnings of the risks of their products.
After an eight-and-a-half-month trial, including 12 weeks of jury deliberations--apparently a record for a civil trial--a mistrial was declared last month when jurors could not reach a verdict on the claims against the chemical suppliers.
Lawyers for the workers have said they will seek a retrial, although no date has been set.
The Lockheed payment was the company’s second large settlement of claims of unsafe working conditions in Burbank. Without admitting liability, the firm in 1989 paid $1.5 million to the U. S. Occupational Safety and Health Administration, which had cited Lockheed for hundreds of safety lapses, many involving the use of chemicals.
Mordoff called the settlement an allowable expense under government contracting regulations that “essentially tacks onto the price of our products.â€
“We see the settlement as having minimized costs because it prevented protracted litigation with hundreds of plaintiffs,†he said.
But in a related type of liability--environmental cleanup--government reimbursement of Lockheed and other defense contractors has come under sharp attack from some environmentalists and members of Congress.
Lockheed officials are expected to testify in Washington on Thursday at a hearing on the issue before the House Government Operations subcommittee on national security.
The hearing and an investigation by the General Accounting Office were prompted by disclosures that the Pentagon may spend more than $1 billion to reimburse cleanup costs of big contractors through payments under their defense contracts.
The biggest example is Lockheed, which is expected to spend at least $263 million to clean up contaminated soil and ground water in Burbank--and then to pass on most of the expense to the government.
Rep. John Conyers Jr. (D-Mich), who chairs the Government Operations Committee and its national security panel, has called the reimbursements “secret bailouts†that show that “no one (at the Pentagon) is really minding the store.â€
But defense contractors have defended the arrangement as consistent with usual business practices, saying that all businesses pass on costs to their customers. “Our customer happens to be the U. S. government,†said Bob Rulon, Lockheed vice president and controller.
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