Lockheed Martin Corp. may face trial over allegations that the agent for its Loral subsidiary plied South Korean officials with sexual favors and bribes to win a $270-million radar systems deal, the California Supreme Court ruled Monday.
The decision comes in a closely watched case filed in 1999 in Los Angeles County Superior Court by Korea Supply Co., which represented a rival defense contractor pursuing the radar systems contract. Korea Supply claimed it lost a $30-million sales commission when Loral's agent, Linda Kim, won the accord.
Despite the setback for Lockheed, companies unconnected to the suit were pleased with another aspect of the Supreme Court's decision. The court rejected Korea Supply's argument that, under California's so-called unfair competition law, it should be allowed to demand the disgorgement of Lockheed's profit if it proves its case.
Many in the business community had feared that the case could have set a precedent allowing garden-variety damage cases to balloon into unfair competition suits, which carry a lesser burden of proof.
This "is a very important result that's likely to have an impact in the future," said James C. Martin, a Los Angeles lawyer who filed a brief on behalf of the Washington Legal Foundation and the National Assn. of Independent Insurers.
A former Koreatown nightclub owner, lounge singer and model, Kim purportedly had an affair with the South Korean defense minister who awarded the contract. The alleged affair -- punctuated by love letters from the defense minister to Kim -- and a separate bribery scheme implicating the pair made headlines in South Korea. The articles detailed U.S. intelligence reports linking Kim to South Korean officials in charge of awarding defense contracts.
The Korean news reports formed the basis for the suit that alleges Kim used improper influence to persuade South Korean officials to give the contract to Loral, even though the Canadian company being represented by Korea Supply had offered to equip the four reconnaissance airplanes with radar for $50 million less.
John Ahn, chairman of privately held Korea Supply, "is going to be very happy," said Maxwell Blecher, a Los Angeles lawyer representing the broker. "All he wanted to do was proceed with this claim and get vindicated and some money."
Blecher said Monday that he had not had a chance to share the news with Ahn, who maintains an office in Buena Park. Blecher said he believed Ahn was in South Korea on business.
Blecher said the case must work its way through the appellate court and back to Superior Court. He said he expected the suit to move into the discovery phase, which would include trips to South Korea. A trial is a year or more away, he said.
Lockheed, which purchased Loral in 1996, remains hopeful that the case can be dismissed after the evidence-gathering phase, said Meghan Mariman, a spokeswoman for the Bethesda, Md.-based company. "Lockheed still believes that we engaged in no improper conduct, and Korea Supply's claims are without merit," she said.
Kim, who splits her time between homes in Saugus and South Korea, has denied the allegations that she unfairly influenced the Loral decision. Neither she nor her lawyer could be reached for comment Monday.
Kim was convicted and served 30 days in a Korean bribery case involving a separate $216-million contract with Texas-based E-Systems. The E-Systems deal was decided at the same time and by the same officials who awarded Loral the radar contract for the four Raytheon Hawker 800XP reconnaissance planes.
Raytheon and Loral have reported receiving subpoenas from a federal grand jury in Los Angeles that is looking into the matter. Though the scope of the inquiry is unclear, it appears to be focused on possible violations of the Foreign Corrupt Practices Act, which bars U.S. companies from bribing foreign officials and caps sales commissions to brokers at $50,000.
Blecher said he had asked for disgorgement of Lockheed's profit only as a backup if the court refused to allow the case to go to forward. He said he now would pursue a straightforward claim for damages that Korea Supply allegedly suffered when it lost its $30-million commission.