BAE pursues Lockheed over $40m compensation claim

The British defence manufacturer BAE Systems is suing its US rival Lockheed Martin for more than $40m (£25m) in a legal dispute over the "centrepiece" of a $1.7bn deal.

BAE bought Lockheed's Aerospace Electronics Systems (AES) business in November 2000 for $1.7bn. The deal was one of its most important purchases of security-sensitive operations in the US. But the "centrepiece", the Sanders electronics business, was embroiled in a lawsuit amid claims that, in 1996, Lockheed had schemed to make a computer company lose a US defence contract.

Cable & Computer Technology won the case against Lockheed in 2002 after numerous appeals. The court was told of the "reprehensible ... conduct of Lockheed officers" and that "the fraud itself was gigantic".

BAE had to pay around $40m in damages and costs. However, in a separate lawsuit filed late last month, BAE claims that under the terms of its acquisition of the Sanders business, Lockheed should pay up. Lockheed has refused to do so. BAE wants compensation and is asking the court to consider a figure of more than the $40m it paid out.

"We regret BAE's decision to file this lawsuit," said a Lockheed spokeswoman. "We will vigorously defend against the allegations. We believe the evidence will demonstrate that BAE knowingly accepted the CCT lawsuit liability when it purchased the AES business unit."

BAE said the lawsuit would not affect its working relationship with Lockheed, its partner on the Joint Strike Fighter project. "We are disappointed that Lockheed has forced this issue back into the court," said a BAE spokesman.

BAE's chief executive Mike Turner is looking for a merger with a US arms manufacturer, and Lockheed had been considered a potential partner.