LOS ANGELES, NOV. 15 -- In what is believed to be the largest legal award in history involving a defense contractor, Lockheed Corp. was slapped with a $45.3 million penalty today by a jury for firing three employees who tried to warn management that the company's C-5B aircraft is defective and unsafe.
The employees -- two internal auditors and a quality-assurance representative -- were fired in 1985 by former Lockheed Chairman Lawrence O. Kitchen after they attempted to persuade Kitchen that the giant Air Force transport was gravely flawed. They sued for wrongful termination.
Lockheed General Counsel Joseph Twomey said the size of the punitive damages was "just outrageous." He vowed to attempt to overturn the verdict -- if necessary, appealing "all the way to the U.S. Supreme Court."
Jurors in the Los Angeles County Superior Court case said in interviews that their intention in returning such a large penalty was to send a message not only to Lockheed but to the entire U.S. defense industry about improper practices in weapons programs.
Herbert Hafif, the attorney who represented two of the three plaintiffs, asserted that the award was a measure of public dissatisfaction with defense industry waste. Hafif called for a congressional investigation into the safety of the C-5B.
The Air Force has said the aircraft is not defective.
In several weeks, Lockheed is scheduled to begin a trial before the Armed Services Board of Contract Appeals involving allegations that the company overcharged the Air Force for the C-5B. The government's original claim was for $495 million, but it has been reduced substantially.
In today's case, the three Lockheed employees alleged that improper heat treating of the main frames of the C-5B at Lockheed's plant in Burbank, Calif., resulted in cracking, warping and other deformities starting in 1983.
The auditors -- Clyde W. Jones Jr. and Terrence F. Schielke -- said they were instructed by audit department executives not to undertake a formal investigation or write a report about the allegations, but they continued to attempt to sound warnings.
In September 1985, the two auditors and plaintiff Thomas R. Benecke, a quality-assurance expert, told Kitchen that they had hired an outside metallurgist at their own expense and had found that samples of the structural parts were defective.
Kitchen testified Oct. 18 that he fired Schielke and Benecke because they acted unprofessionally, failed to conduct a formal audit of their own allegations and took property off company premises when they went to the metallurgist. Jones retired after he was threatened with firing, according to a Lockheed memorandum introduced in the seven-week trial.
Though the case was brought on grounds of wrongful termination, the trial revolved around the question of whether C-5Bs contain flawed parts.
Hafif tried to show -- and, according to jurors, succeeded -- that Lockheed did not perform certain tests to certify that a heat-treating oven was operating at the correct temperature.
The employees alleged that the ovens operated at too high a temperature and caused "eutectic melting," in which certain metals inside the aluminum alloy melted, causing flaws.