Lockheed Martin Corp. (LMT) won’t ask the Pentagon to reimburse part of the $3.5 million it is paying the chief operating officer who left last month after it was disclosed he had an extramarital affair with a subordinate.
Christopher E. Kubasik, who had been in line to become chief executive officer of the world’s largest defense contractor on Jan. 1, departed after an inquiry confirmed a “lengthy, close and personal relationship” with someone who worked for him, Chairman and CEO Robert Stevens said on Nov. 9.
Military contractors are eligible to seek Pentagon reimbursement for a portion of executive compensation. The maximum reimbursement, based on an Office of Federal Procurement Policy benchmark, is $763,029.
Lockheed Martin notified the Defense Contract Management Agency that “we do not intend to seek government reimbursement for any part of Mr. Kubasik’s separation payment,” Jennifer Whitlow, a spokeswoman for the company, said in an e-mailed statement.
“This was a unique situation, and while we believe the agreement was appropriate to protect ours and our customers’ interests, we do not plan to seek reimbursement for any part of the separation payment in this situation,” she said.
Asked how much reimbursement Lockheed could have requested, Whitlow said “We’re not going to speculate on what we might have done.”
Army Lieutenant Colonel Elizabeth Robbins, a Pentagon spokeswoman, confirmed in an e-mail that the company had informed the agency it wouldn’t seek reimbursement.
“Lockheed Martin did not provide any rationale for its decision,” she said.
Kubasik was promised $3 million in severance and an additional $500,000 for waiving any claims against the company, according to a Nov. 9 letter to him from Stevens that the company filed with the Securities and Exchange Commission.
“I regret that my conduct in this matter did not meet the standards to which I have always held myself,” Kubasik said in a statement the same day.
With Kubasik’s departure, Marillyn Hewson will become CEO next month, and Stevens will stay on as executive chairman.
“It’s good to see the contractor take action so that no tax dollars are involved in any severance pay,” Senator Charles Grassley, an Iowa Republican, said in an e-mailed statement.
The $631.4 billion defense authorization bill the Senate passed unanimously on Dec. 4 includes an amendment by Manchin that would set the maximum compensation at $230,700. That’s the annual salary for the U.S. vice president.
The House-passed defense bill doesn’t have a similar provision, so it will be subject to discussion when lawmakers start work this week on a compromise version of the legislation.
“I am determined to make sure that this provision is not watered down as Congress moves forward with the defense bill,” Manchin said in June, when the Senate Armed Services Committee gave initial approval to his provision.
The Professional Services Council, which represents about 350 contractors, said in June that it was “actively opposing” Manchin’s proposal, according to Roger Jordan, vice president of government relations for the Arlington, Virginia-based group.
The defense bill is H.R. 4310.
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