Lucas faces $100m suit
Saturday 25 February 1995
Lucas may be forced to make further provisions against profits this year after it emerged that US authorities are seeking up to $100m compensation in a dispute over fraudulent tests on military equipment.
It was also disclosed that the TI Group's Dowty Polymers subsidiary could be facing a $70m criminal suit for alleged overpricing of contracts to the US Air Force. The allegations were denied.
The civil case against Lucas was sparked by a former employee who has been pursuing the company under what is known in the US as ``whistleblower's action''. The US Justice Department took up the man's case and will share the damages if they win.
Last October Lucas set aside provisions of £87m to cover its US legal costs and general restructuring in America and the UK. The company has already paid £20m in costs and criminal damages after admitting that its Western Gear and AUL divisions falsified tests on parts for aircraft and weapons.
Analysts say the expense incurred in restructuring the aerospace division in the US and UK has eaten up another substantial chunk of the provisions. Lucas maintained that the provisions would be adequate, but an analyst said: "They can't have much money left in the pot to cover a claim for $100m. I think even Lucas has been surprised by latest developments.''
John Berkenkamp, president of Lucas Aerospace US, said yesterday that the American authorities were being unreasonable. "We have paid a severe fine and taken taken extensive remedial actions to put things right. Lucas has acted in good faith in negotiations to reach a fair resolution in this case."
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