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Last Updated:  Wednesday, 5 March, 2003, 07:05 GMT
Lockheed sex suit to go ahead
Raytheon's Hawker aircraft
Raytheon's Hawker aircraft was fitted with Loral's radar
A US court has ruled that arms maker Lockheed Martin can be sued for allegedly using sexual favours and bribes to win a South Korean defence contract.

Lockheed Martin has denied the allegations.

The case was filed by the Korea Supply Company (KSC) after it lost a contract to Lockheed-subsidiary Loral for the supply of an aircraft radar system to South Korea in 1996.

"The court said we have a claim for ... interference with contract rights," said Maxwell Blecher, KSC's lawyer.

But the California Supreme Court ruled that Lockheed did not have to hand over profits it made from the $225m deal if the allegations were proved.

Corporate America was closely watching the case to see if it would set a precedent allowing damage claims from unfair competition suits, which carry a lesser burden of proof.

KSC expected a $30m commission if a Canadian company it represented - MacDonald, Dittwiler and Associates - had won the contract.

Vigorous defence

KSC's lawsuit claims a Loral employee - Linda Kim, a former model and singer - bribed South Korean military officers and offered sexual favours to the country's defence minister.

"We think that when the case does go to trial the facts will show that KSC's claims are false and the case will be dismissed on summary judgment," a Lockheed spokeswoman said.

Ms Kim's lawyers have also denied the allegations.

South Korea's former-defence minister Lee Yang Ho has admitted to having an "inappropriate relationship" with Ms Kim but denies it influenced his decision making.

The Foreign Corrupt Practices Act forbids US companies from bribing foreign officials to influence an official act or decision.

Love and war

Ms Kim's love letters to the defence minister made headline news in South Korea after the two were implicated in another bribery scandal.

In a filing to the US Securities & Exchange Commission, Lockheed has confirmed documents relating to the case have been subpoenaed and that it was co-operating.

Privately owned KSC represents military equipment makers in transactions with South Korea's government.

Lockheed bought Loral in 1996 and it is now known as Lockheed Martin Tactical Systems.

Ms Kim now lives in Los Angeles.

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