Lockheed settles price-gouging charges

Defense industry giant Lockheed Martin will pay the Pentagon $15.9 million for its part in an alleged price-gouging scheme by one of its subcontractors, according to the Justice Department. 

For seven years, Tools & Metals Inc., a Lockheed Martin subcontractor based in Fort Worth, Texas, allegedly inflated the costs of tools sold to the company for use on military aircraft.

Lockheed’s main assembly facility for the F-35 Joint Strike Fighter and other aircraft is headquartered in Fort Worth. 

The fighter has grown into the most expensive military program in Pentagon history, due to numerous schedule delays and cost increases. 

Then-Defense Secretary Robert Gates last year ordered his department to withhold $600 million in awards fees to Lockheed as punishment for the lackluster progress and excessive cost growth on the fighter program. 

The subcontractor reportedly ran the scam from 1998 through 2005, according to reports in the Wall Street Journal. In 2005, former Tools & Metals president Todd Loftis pleaded guilty to fraud charges tied to the scheme and was sentenced to seven years in federal prison. 

Despite the agreement, Lockheed maintains the defense firm never did  “knowingly engage” in the scheme, according to a statement to the Journal. 

Lockheed said it was notified in late 2007 of an ongoing federal investigation into the billing practices of Tools & Metals. It has since taken steps to ensure its oversight of the supplier management process. 

Lockheed officials “fully cooperated” with the Loftis investigation and the $15.9 million settlement was an “effort to close the matter in a timely manner,” the statement added.