Simmons Vows to Contest Lockheed Election in Court

Harold C. Simmons, the Texas billionaire who recently lost a proxy contest for control of Lockheed, said Monday that he will try to invalidate the election by filing a lawsuit challenging its legality and fairness.

Simmons revealed his plans in an interview after meeting with Lockheed Chairman Daniel M. Tellep at the aerospace firm’s Calabasas headquarters. The meeting was held hours after Tellep released the official results of the March 29 shareholder vote confirming that incumbent directors had defeated a rival slate selected and led by Simmons.

The final tally showed that the 14 incumbents had received support ranging from 57.6% to 60.7% of the voted shares, with many shareholders splitting votes between the incumbents and Simmons’ slate. That result was virtually identical to a preliminary count released April 10 by an independent election inspector.

Much of the support for the current board came from Lockheed’s employee stock ownership plan. Lockheed has said that more than 90% of the plan’s stock was voted in favor of the incumbents. With an 18.91% stake, the ESOP controls the second-largest block of Lockheed stock.

However, Simmons said he will contest the ESOP votes, claiming that a major block of the shares alloted to the plan’s members were improperly voted by the ESOP trustee.

The flap over the ESOP vote developed immediately after the March 29 annual meeting, the final opportunity for Lockheed shareholders to choose between the rival board slates. Hours after the shareholders meeting, a spokesman for the ESOP trustee said the trustee did not receive instructions on how to vote a block of shares believed to number at least 500,000 of the roughly 12 million shares owned by the plan. Despite the lack of instructions, the trustee voted the shares for management.

Responding immediately to the trustee’s action, the Simmons group said those shares should not have been voted for either side if no instructions were received. Notices sent to shareholders warned that votes would not be cast unless voting instructions were received by the trustee by March 27.

However, the trustee determined that it must vote all the ESOP shares--even those for which it received no instructions--to satisfy its fiduciary duty, the plan’s spokesman has said.

Simmons said he will also challenge the ESOP vote in court because plan members have not yet paid for most of its stock. Lockheed management helped establish the ESOP, guaranteeing the loan the plan used to purchase company stock. Members gradually buy stock from the plan.

Simmons’ claimed that Lockheed managers helped established the ESOP because they believed that they would receive support of the plan’s members during any contested board election.

“The (ESOP) shares were voted by people who don’t own (all) the stock,” Simmons said. “It’s illegal. It’s unfair . . . It’s just a charade.”

Simmons also contended that some institutional shareholders, fearing reprisals by Lockheed management, voted for incumbents solely because they believed that the ESOP would vote for the incumbents and thus guarantee their victory. Lockheed management is allowed to find out how institutional shareholder vote.

Simmons said he plans to file the suit this week--possibly as early as today--in federal court in Los Angeles.