Martin Marietta Business Case

Internal Corporate Memorandum

To: Chris Kubasik, President and COO Date: March 7, 2010

From: Nick Lanzi, Executive Vice President of Aeronautics’ Unit

Re: Lockheed Martin should voluntarily disclose procurement irregularities

cc: Tim Riedel, Alice Eldridge

Background. An internal investigation was recently conducted by experienced procurement officers and the legal department upon discovery of procurement irregularities in the aeronautics unit. The investigation revealed that company buyers had made payments totaling approximately $4 million to a supplier for work that had not been completed. Claims for this amount have already been submitted and paid by the government. The investigation was not able to identify how the irregularities were committed and it is unclear whether the Procurement Department had just been careless or whether intentional fraud had been committed on the part of one of Lockheed Martin’s employees.

Proposal. In order to maximize net operating profit in the long-run, I propose that Lockheed Martin promptly and fully disclose the findings of the investigation in accordance with Corporate Operating Instructions on Voluntary Disclosure. Disclosure of the misconduct is the best option because it minimizes the financial risk and scandal that could result should the Federal government discover the discrepancy independently.

Reasoning. Lockheed Martin has earned a reputation for having one of the best ethics programs in the defense industry with a comprehensive approach to self-governance. Voluntary disclosure of the procurement irregularities would result in a Federal government investigation which would have access to resources that may lead to a discovery of criminal motive. Even so, the Justice department would also have to take into consideration a number of factors that could ensure a favorable outcome for Lockheed Martin such as the company’s candid and complete disclosure, their extensive ethics program and...