Examination of Witnesses (Questions 268
- 279)
WEDNESDAY 3 JUNE 2009
MR PHILIP
BRAMWELL, MR
ALAN GARWOOD,
MR LAWRENCE
HAMMOND AND
MR STEPHEN
BALL
Q268 Chairman: Gentlemen, Thank you
very much for coming. We really appreciate it. You know the draft
legislation proposals we are looking at and I am sure you have
read all the necessary documentation. I am sorry the invitation
came rather late but if you are prepared to write some memorandum
to us that would be gratefully appreciated, and, if you do not
mind, if there are any additional questions we do not want to
call you back but if we could write to you we would appreciate
that too. The allegations of bribery and fraud within the defence
industry, especially arms exports, have been pretty destabilising
for a lot of companies and greatly embarrassing to a lot of companies.
There are very few nations that have a defence industry that engages
in arms exports that has managed to avoid any serious accusations,
but that has largely passed. The question I wish to ask you all
is what lessons have you learned from your own companies' failures
or accusations of failures, which can be just as damning as actual
failures, and what are you putting into practice in order to meet
the criticisms for your own internal inquiries? That is obviously
too long; I hope it will be too long, for a one-hour—I will
not use the word "interrogation"—questioning.
We already have the Woolf Report on what BAE is doing, but if
you could send us your documentation we would find that very helpful.
Mr Ball, please. The question is what are you doing to meet the
criticisms?
Mr Ball: Within
Lockheed Martin Corporation, Chairman, we have introduced policies
and procedures and a compliance culture that aligns with US legislation,
which is FCPA, the Foreign Corrupt Practices Act. We introduced
that during the period when we were Lockheed Corporation and when
we became Lockheed Martin Corporation we continued with that process.
Essentially, the most important component is creating an environment
of compliance with legislation and the ethics guidance of the
corporation.
Q269 Chairman: So where you have
directors or very senior staff their office is responsible for
ensuring that you meet (a) your own standards and (b) the standards
of the US Government?
Mr Ball: Yes. The Foreign Corrupt
Practices Act requires us to provide a regular report to them,
which we are accountable for, and anybody that joins the corporation
has to go through a standard set of compliance training, and then
that compliance training is refreshed every year through a cascade
from the chairman of the corporation all the way through his line
of reporting right the way to the bottom of the corporation.
Q270 Chairman: Is there any collaboration
between US companies on this because if one breaks ranks they
run the chance of winning a contract? Is there any inter-American
collaboration on enhancing ethical standards and meeting legal
requirements?
Mr Ball: I cannot answer that
question. All I would say is that we as a corporation believe
it is in our best interests to be absolutely compliant with the
law that is in place.
Q271 Chairman: Your company complained
to one of the agencies of the US Government about one of your
competitors, about the way in which they had acted to the detriment
of yourselves, so if you do not collaborate do you fall out with
your competitors if you think they are playing dirty pool?
Mr Ball: I certainly would say
that we see the elimination of bribery and corruption as a way
of levelling the playing field for everybody so that it is a fair
battle, if you like, for business.
Q272 Earl of Onslow: We know that
Lockheed was involved in bribing Prince Bernhard, so we know that
you have been up to old-fashioned habits. When was the last time
Lockheed paid a bribe or dodgy commission?
Mr Ball: You are referring to
periods back in the 1970s.
Q273 Earl of Onslow: Yes. I am assuming
that this was the practice, because I think this has been well
established. What I am trying to find out is when you stopped
doing it.
Mr Ball: When we implemented—
Q274 Earl of Onslow: And that was
the last time there was a bribe or a dodgy commission paid, was
it?
Mr Ball: Yes.
Q275 Lord Thomas of Gresford: I do
not think Mr Ball finished his sentence and I would be grateful
if he would finish what he was about to say. You said there had
not been commissions since something and then the noble Earl interrupted
you, I am afraid, so we did not quite hear what you were going
to say.
Mr Ball: Since we implemented
policies and procedures to comply with the Foreign Corrupt Practices
Act.
Q276 Lord Thomas of Gresford: What
year was that?
Mr Ball: I cannot tell you the
exact year. It was 1977, I believe, when the Act came in.
Q277 Lord Thomas of Gresford: That
was following the problems between Lockheed and Japan rather than
Lockheed and Prince Bernhard, was it not?
Mr Ball: Yes.
Q278 Chairman: I think Prince Bernhard
was the main thing, and I am not seeking to be obstreperous but
even though the legislation is pretty strong, much stronger than
we have or anybody else has, there have still been misdemeanours.
I was looking at an interesting book by Shearman and Sterling
running to nearly 311 pages on all of the cases that have been
brought by lawyers or by the US against contractors, specifically
Colt, Titan Corporation, Lockheed Martin, Venturian, United Defence
Industries, et cetera, so despite the legislation, and one must
aspire to that legislation, still some pretty naughty things are
happening and I think we would like reassurance that you do not
just rely on meeting the requirements of US legislation but you
are excessively vigilant in order to not to be having a finger
pointed at you either within the US or abroad. That is the point
I would wish to make.
Mr Ball: Yes, and our code of
ethics that we train everyone on in the business and reinforce
on a regular basis hopefully has a strap line that we "do
the right thing".
Q279 Lord Thomas of Gresford: Mr
Ball, it is obvious that the regime in the United States is much
stricter than it is in this country and prosecutions, as Mr George
said a moment ago, have followed quite frequently against various
companies in the United States. To what extent has it made United
States defence industries less competitive to have the Foreign
Corrupt Practices Act imposed upon them?
Mr Ball: I am sorry, I cannot
make that judgment. We simply recognise that we need to maintain
a level of compliance, and if that means that we are going to
lose a contract as a result of not being prepared to offer a bribe
then our choice is that we would lose the contract.
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