Five weeks ago today, a government official charged that Lockheed Shipbuilding and Construction Co. (LSCC) built seven amphibious transport docks, known as LPDs, for the Navy, but billed the government for enough steel to build at least 12.
Company officials reacted with outrage to the accusation, made by Goodwin Chase, chairman of the Renegotiation Board, the small executive branch agency responsible for recovering excessive profits from defense, space and certain other government contractors.
"That's a lie," said Graham Whipple, president of Lockheed Shipbuilding in Seattle. Moreever, he allleged, Chase's estimate of the amount of missing steel - 73 million pounds worth $7 million was "extremely inaccurate."
Also angered was Robert W. Haack, chairman of Lockheed Aircraft Corp., owner of LSCC. He said he was shocked by Chase's testimony tothe Senate Banking, Housing and Urban Affairs Committee, terming it "inaccurate, misleading and unjust."
Committee Chairman William Proxmire (D.-Wis.) asked Chase to provide further documentation for his charges. To get it, Chase in late June sent three board aides - T.E. Driscoll, J.C. O'Connor and Henry J. Miller - to Scattle for three days to check both LSCC and Navy records and sources.
Their principal conclusion: the amount of steel unaccounted for was not the 73 million pounds originally alleged, but 117.4 million pounds, valued at $10.2 million enough to build nine extra LPDs.
Chase reported the conclusion in a letter hand-delivered to Proxmire late Friday. The "denials and protestations" of Whipple and Haack "are simply not valid," Chase said. "I stand foursquare on my statement and would be pleased to have it subjected to investigative scrutiny."
A spokesman for LSCC, asked for comment, recalled last night a statement made in June by Lockheed Chairman Haack: "The Renegotiation Board has not to date inspected applicable detailed books and records of Lockheed Shipbuilding."
The spokesman indicated that Haack referred to an inspection on the company premises. However, the board aides said they had found the relevant records in the custody of the Navy.
The seven LPDs delivered to the Navy - each containing between 12 million and 14 million pounds of steel - were commissioned between October, 1968, and July, 1971.
In Seattle, the board investigators found that the majority of the steel intended for the LPDS had been stored at the leckenby Structural Steel Co.
Frequently, steel was transported from Leckenby to the shipyard without records being made, board aide Driscoll said in a memo forwarded by Chase to Proxmire.
"From the time the steel was booked or billed to the government until the Navy determined the weight of the ships, accountability is next to impossible to determine due to lack of documentation," Driscoll wrote.
"We know that millions of pounds purchased were not incorporated in the ships," Driscoll continued. He said, could have shed light on the situation:
H. P. McLaughlin, who had been president of the LSSC predecessor firm, Puget Sound Bridge and Dry Dock Co., when the Navy awarded the LPD construction contracts, who was president of Leckenby when the ships were built and "who is living in South America (and) is not available."
Robert N. Waters, a former executive vice president of LSCC, who in 1972 became treasurer and a vice president of Lockheed Aircraft. Three years later, in 1975, the Lockheed bribery scandal began to unfold. In August of that year, Proxmire scheduled a hearing on whether there had been violations of the law under which the government had guaranteed $250 million in loans to Lockheed.
On Aug. 22, 1975 - three days before the day of the hearing - Waters, 54, shot himself to death. His brother, Norm, blamed business pressure. He said Robert had left a note in which the last words were, "I'm just too tired to go on."
The charges and countercharges in the Lockheed case are a visible aspect of an intense, prolonged and mostly behind-the-scenes struggle over legislation to guarantee the Renegotiation Board's survival and strengthen the ability of its staff - 177 persons - to recover excessive profits.
The most controversial provision in the legislation - which Senate Banking Plans to mark up Thursday - would require the board to look for possible excess profits in each of a contractor's product lines. This would prevent conglomerates such as Lockheed from consolidating various cost and profit figures from unrelated product lines, as they do now.
The Senate hearings in 1973, Chase, then a member of the board, showed that by filing consolidated reports for fighter aircraft and space gear, McDonnell Douglas Corp. avoided making refunds to the government of at least $15 million for 1967 and $16 million for 1968.
In his June testimony this year, Chase said that the board - while dominated by appointees of President Nixon - allowed Lockheed to file a consolidated report for fiscal 1971 in which it claimed a $68 million loss. Actually, Chase said, the company had a $4 million profit.
To transform the profit into a loss, Chase said, Lockheed used large losses claimed by LSCC as offsets to large profits generated by other affiliates engaged in defense production totally unrelated to shipbuilding.
After the hearing, board the O'Connor, a financial analyst, made a further study in which he concluded that if the pending legislation had been in effect in 1971, Lockheed would have owed the government a refund of at least $20 million - more that triple the board's current budget of $5.6 million.
O'Connor said that, in 1971, the return on stockholder capital invested in Lockheed MISSILE AND Space Co., which had missile sales to the government of $727 million, was 246.5 per cent.
Citing that return to Proxmire, Chase said, "Lockheed's indignation, charges of unfairness and platitudes of abuses by the Renegotiation Board impress me at the level of zero."
The principal advocates of the legislation are President Carter and legislators including Proxmire and Rep. Joseph G. Minish (D-N.J.).
Seeking to kill the legislation are not only companies mainly dependent upon defense contracts, such as Lockheed, but also trade groups, including the Financial Executive Institute and the Iron and Steel Institute, and numerous individual subcontractors that have launched a letter-writing companing to Capitol Hill.
In addition, efforts to water down the legislation or to win exemptions from it have been made by, among others, the American Bankers Association, in behalf of banks, and Sun Oil Co., in behalf of oil companies.