Lockheed Martin has agreed to settle a $1.3 billion lawsuit over claims the defense contractor shortchanged about 120,000 workers and retirees who participate in its pension plans. The settlement was reached as a trial was set to begin this week.
Workers accused the company of subjecting them to excessive fees and leaving those investing in its stock fund with returns that were worse than if they had bought shares on the open market. The settlement was disclosed on Tuesday by U.S. District Judge Michael Reagan in East St. Louis, Ill., and still requires his approval.
The defense contractor’s in-house investment manager charged them excessive fees and under-delivered on performance in Lockheed’s retirement plans, which manage $26 billion of assets, said Jerome Schlichter, a lawyer for the workers. The company calls the plans “among the nation’s largest and most complex.” The plan participants were seeking more than $1.3 billion in damages.
Lockheed employees and retirees claim they were charged “unreasonable and excessive” fees that weren’t incurred solely for their benefit and weren’t disclosed. Lockheed and its investment management company are also accused of mismanaging employee 401(k) plans, including by offering a fund that didn’t benefit people saving for retirement.
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A trial without a jury, scheduled to start on Monday, was postponed for last-minute negotiations after Reagan issued a Dec. 14 order stating he wouldn’t entertain any settlement proposals after the first witness was called.
Jennifer Allen, a spokeswoman for the Bethesda, Maryland-based corporation, confirmed the accord in an e-mailed statement. Lockheed Martin employs more than 13,000 at its aeronautics complex in west Fort Worth, where it builds the F-35 fighter jet, and another 2,700 in Grand Prairie at its Missiles and Fire Control business.
“The parties have reached an agreement in principle to settle the case,” Allen said. “Details of the agreement are still being finalized.
The plan beneficiaries’ lead lawyer, Jerome Schlichter of St. Louis-based Schlichter Bogard & Denton, declined to comment. He said on Monday that he expected the trial to proceed.
Reagan said that he will set a deadline for the filing of papers detailing the terms of the agreement.
“I still have to determine if it’s fair to the class,” the judge said. The lawsuit was filed in 2006.