Suit Says Firm Misused Funds for Defense Job

OAKLAND — A former employee and a current worker at Lockheed Missiles & Space Inc. accused the Silicon Valley defense contractor Wednesday of misusing upward of $15 million in government money in a highly secretive national defense program.

In an unusual suit unsealed Wednesday, Lockheed was accused of improperly hiring a subcontractor and then allowing its workers to spend months at a time doing nothing while they awaited special security clearances to work on the sensitive National Security Agency project.

During the waiting period, some employees played computer games, sold real estate and took classes. One senior manager at Lockheed built a small airplane at government expense, says the suit by Martin Bloem, 33, a Lockheed engineer, and Margaret Newsham, 43, who was fired from Lockheed in 1984.

The suit claimed under-used employees ran football pools on government computers. It said one worker copied the entire Bible into a computer, while another made cable television decoders and still another sold Herbalife products. These activities allegedly went on for varying periods from 1981 through 1984.

“I think you’re really looking at the very tip of the iceberg,” Newsham said at a press conference here, called by her attorney, Guy T. Saperstein, and the Project on Military Procurement, a Washington watchdog group that helped investigate the case.

‘A Lot More Involved’

“These are covert programs, and I believe as we delve into this we will discover that there is a lot more involved,” Newsham said.

Lockheed Missiles & Space Inc., with 23,700 employees in Sunnyvale, develops spacecraft, satellite systems and submarine-launched missiles. It is a subsidiary of Lockheed Corp.

Lockheed spokeswoman Jan Wrather said the Sunnyvale company “vigorously denies that any false charges were made or were condoned by the company.”

“We’re confident that the suit, if it goes to trial, will show that the company has not engaged in any improper practices,” Wrather said.

Newsham helped kick off an investigation into Lockheed’s handling of the project by complaining to the Defense Contract Audit Agency. The agency discovered roughly $15 million worth of questionable charges in the project, according to Saperstein, who released copies of audits Wednesday.

The agency’s audits in 1985 and 1986 form much of the foundation of the suit, which was filed in federal court in San Jose. Saperstein is relying on the federal False Claims Act, which provides that government contractors can be forced to repay three times the amount of any fraud, and individuals can collect some of the money.

Similar suits have been filed against other defense contractors. However, Wednesday’s suit may be the first to involve a so-called “black project,” so nicknamed because of the super-secret nature of the program, Saperstein said.