Government investigators are contending that Lockheed Shipbuilding and Construction Co. built 12 war vessels for the Navy but billed the government for enough steel to build 20, The Washington Post learned yesterday.
The excess steel at issue - nearly 80 million pounds valued at about $8 million - figures in disputed claims for $62 million that the Lockheed Aircraft Corp. subsidiary has filed against the Navy.
Investigations of the claims were begun in April, 1975, by the FBI, and in June, 1976, by the Renegotiation Board, the executive branch unit responsible for recovering excess profits from defense contractors. In addition, one source told a reporter that federal prosecutors have been presenting evidence in the case to a grand jury for several months.
In Seattle, a spokesman for Lockheed Shipbuilding said that LSCC "has been cooperating fully with the Justice Department's ongoing investigation . . . We are aware of no wrongdoing in connection with the claims and believe the department's investigation, when concluded, will bear this out. We will not comment further on this matter until the investigation is concluded."
A piece of the story is to surface today at a Senate Banking, Housing and Urban Affairs Committee hearing on a bill to strengthen the Renegotiation Board.
One part of the bill would require the board to look for excess profits on each product line in each division of conglomerate contractors such as Lockheed, instead of letting the contractors consolidate all their various cost and profit figures, as they can do now.
Renegotiation Board Chairman Godwin Chase, in testimony prepared for today's hearing, says the board relied on a consolidated rather than product-by-product financial statement to conclude in 1974 that one major contractor had not earned excessive profits on government business during fiscal 1971. The testimony does not name the contractor, but a reporter learned independently that it was Lockheed.
Chase says a new analysis of data given only "cursory, inadequate review" three years ago shows that the company claimed a $68 million loss that "was in fact a $4 million profit."
Chase claims in his prepared testimony, on which he refused to elaborate yesterday, that under the proposed legislation, the board, in examining all the company's divisions separately, "would have unquestionably concluded that excessive profits existed."
His statement cites - but does not name - one division of the company with sales of $727 million that has been found to have had "a return on net worth of 246 per cent." This was a reference to Lockheed Shipbuilding, a reporter determined.
This division showed a loss of $7 million for the period in question. But according to Chase's testimony, a board investigation found that the division, over a three-year period, had claimed to have purchased 73 million more pounds of steel than it needed to build seven ships.
The ships he referred to are amphibious transport docks known as LPD'S that the Navy commissioned between October, 1968, and July, 1971. Each contains about 12 million to 14 million pounds of steel. Thus the alleged excess would be enough for at least five more.
Other ships involved in the case are five destroyer escorts in the so-called 1052 class that the Navy commissioned between May, 1970, and September, 1972. Each contains, according to Renegotiation Board staff investigators, 2.46 million pounds of steel, or a total for the five DEs of 12.3 million pounds.
But in a report last July, which a reporter has obtained, the investigators said LSCC bought 18.7 million pounds that it claimed to have used in the DEs.
Normally, shipyards allow 10 per cent for scrap. LSCC allowed, for bidding purposes, 20 per cent, on the grounds that the DEs were a new class of vessels. Changes in plans added another 2 per cent, bringing the total accounted for to 15 million pounds - 3.7 million less than the 18.7 million purchased.
"As the steel did not end up on the ships and if LSCC's books are valid, the contractor purchased enough steel for almost three more ships instead of one ship, as indicated by the scrap and growth estimates," the report said.
The reference to the validity of LSCC's books is illuminated elsewhere in the report, where the investigators said. "Both the Navy and the FBI reported that many records were destroyed and that it was impossible to trace entries on the books source documents."
The report said it was "theoretically possible that some of the excess steel had ended up in a commercial ship and in a ferry for the state of Alaska both built by LSCC.
The report cited unverified statements by Navy and FBI investigators that LSCC sold 2 million pounds of new plate as scrap to a metal dealer, and that another Seattle firm, Todd Shipyards, built seven DEs in the 1052 class with "very little more material than LSCC used to build five.
Two years ago, a Pentagon agency, the Armed Services Board of Contract Appeals, ordered the Navy to pay the $62 million in LSCC claims - $68 million less than the firm had sought, but $55 million more than the Navy had said was merited. The board said it made the ruling because David Packard, then deputy secretary of defense, had assured Lockheed that the $62 million would be paid.
After Sen. William Proxmire (D-Wis.), now chairman of Senate Banking, denounced the order as illegal, the Pentagon suspended possible payment pending the outcome of the Justice Department investigation.