Cubic Responds to Lawsuit by 3 Shareholders

Defense contractor Cubic Corp. and its chairman on Friday lashed out against three dissident shareholders who on Aug. 11 filed a multimillion-dollar lawsuit that alleged wrongdoing by the company in connection with the Pentagon procurement scandal.

In an unusual “special report” mailed recently to stockholders, Cubic Chairman Walter J. Zable said it was “reckless, scurrilous and false” for the shareholders to contend that Cubic Corp.’s top officials illegally used two industry consultants to bribe Pentagon officials in return for secret information.

‘Distorted’ Reports

The lawsuit was the first of what is expected to be a flood of civil lawsuits stemming from the unfolding Pentagon procurement scandal.

Cubic is one of 16 defense firms where offices were searched as part of the ongoing Justice Department investigation of Pentagon procurement fraud. No criminal charges have been filed but prosecutors said they expect indictments this fall.

Cubic said it issued the unusual report because media coverage generated by the lawsuit portrayed Cubic as “guilty until proven innocent.” William S. Lerach of San Diego, the attorney who filed the suit for three Cubic shareholders, is “the only person to charge any wrongdoing,” according to Zable’s report.

Cites Exaggerations

Lerach could not be reached for his remarks on Cubic’s special report.

The shareholders who filed the suit “exaggerated and distorted” news reports about Cubic’s role in that investigation, according to Zable. Zable and his son, Walter C. Zable, Cubic’s vice chairman, control about 33% of Cubic’s outstanding shares.

It would be “morally wrong, legally unsupportable and financially unwarranted . . . to quickly settle out of court in order to get this matter out of (Cubic’s) corporate hair,” according to the report signed by Zable.