Defense contractors discipline hundreds with ethics programs.

Defense contractors discipline hundreds with ethics programs

Northrop Corp. suspended or discharged more than 50 of its employees for violations reported to the company last year through its whistleblower program.

About the same number were disciplined or fired at Lockheed Corp. under a similar program.

Since 1986, when the Aerospace Industries Association established a code of conduct for its members, hundreds of workers at major Los Angeles-area defense companies have been disciplined for corporate wrongdoing, mainly for over- and misbilling, according to company officials.

Still, the charges of fraud and mismanagement have continued, with ongoing federal investigations and fairly regular announcements of indictments. In Los Angeles, three former Lockheed auditors are currently in court, charging wrongful termination for disclosing alleged faulty construction on the C-5B military aircraft at the company's Burbank facility.

None of the companies' officials would say that the programs have eliminated the kind of fraud problems that plagued the industry during the 1980s, but they all agreed that the programs have improved their image and opened lines of communications between workers and management. They also said the programs have resulted in procedural and manufacturing changes that have probably saved the companies, and taxpayers, hundreds of thousands of dollars.

"The fact that the number of calls has not fluctuated greatly shows that it's working," said John Booth, a spokesman for TRW Space and Defense Sector in Redondo Beach, a division of TRW Inc. "If it wasn't working and the workers didn't have confidence in it they wouldn't be calling, the calls would have dried up."

Spokesmen for two major unions that represent aerospace workers said whistle-blower, or code of ethics, programs did not pose ethical problems for members.

However, Don Nakamoto, a spokesman for the International Association of Machinists and Aerospace Workers District 727, said some workers may still feel hesitant to report wrongdoing.

"There's a natural obstacle to it working in that even though the company may say they're protected, workers may still be nervous about calling because they could be harassed," said Nakamoto.

At Northrop, which is based in Century City and has manufacturing facilities in Palmdale and Rico Rivera, workers made 386 calls or some other form of contact with the company's Open Line communication system in 1989. More than 170 of the calls were investigated by the company and the rest were resolved during the initial contact. Most of the contacts were made by telephone.

Over 100 of the calls in 1989 resulted in some form of corrective action, including disciplining more than 50 workers, a third of whom were managers, Northrop officials said.

Of the contacts that required punitive action, almost half were for "time charging," or misrepresenting the amount of time spent on a job. Almost 20 percent of the complaints concerned misuse of property, and the rest were about product quality, supplier relations and other subjects.

At Lockheed's soon-to-be-abandoned production facility in Burbank, about 480 workers have filed complaints with the company's office of business practices, said its director, Don Gore, an attorney for the Calabasas-based corporation.

He said about 25 percent of the calls require an internal investigation, and 10 percent to 15 percent have resulted in disciplinary action.

"A large percentage of the calls, at least half I would say, are for personnel-type problems that have to do with fellow workers or supervisors . . . But a fair number are serious enough to require an investigation. I know early in the program supervisors were actually terminated over labor-charging practices," said Gore.

Gore could not say whether the communications system would have prevented the current court action but he said the incident occurred before the program began.

Officials at other major Los Angeles area defense contractors - including Douglas Aircraft Co., Hughes Aircraft and Rockwell International - said they also have whistleblower programs that were established or expanded after the Aerospace Industries Association issued its code of conduct for members.

El Segundo-based Rockwell, which was the state's biggest defense contractor during 1989 with $3.1 billion worth of federal business, reported that more than 4,300 workers have contacted its employee ombudsman since the position was established. Last year, the ombudsman handled about 1,200 calls, about one-third of which were resolved immediately.

"The ombudsman's office initiated investigations on the remaining cases. approximately half of which concerned allegations of time-card irregularities," the company stated in its company newsletter earlier this year.

Paul Schubert, Rockwell's ombudsman, said in some cases the investigations have been turned over the FBI or the Department of Defense for prosecution.

At Hughes, based in Los Angeles, 1,900 calls were made to the company's 13 telephone hotlines last year, said Allan MacAller, manager of the corporate ethics program.

More than 200 of the calls required disciplinary action, including the dismissal of about 60 workers, mainly for over- and mis-billing on company projects, said MacAller.

"Defense contractors have a tremendous fiduciary responsibility to the public and they (the ethics programs) have had a positive influence on our industry...But I think what has happened in our industry is really no different than what is happening in other industries, like Wall Street or even in Congress," said MacAller.

He said eight people work full-time in his department.

"But I don't believe you can put a dollar value on what these programs cost. Their value to the companies far outweighs their costs," MacAller said. Long Beach-based Douglas Aircraft has an ombudsman program, but figures were not available to the Business Journal before press time.

The Aerospace Industries Association, a trade group based in Alexandria, Va., issued its code of conduct after an independent study found defense contractors lacked a clear program of worker ethics, said Alexis Allen, a spokesman for the association.

The code said Aerospace Industries Association members must have a written code of ethics and conduct and each company must establish a mechanism for hearing and investigating employee allegations and complaints.