Department Of Justice, Boeing Reach Agreement To End Investigation Into Company’s Ethics Violations

Boeing Co. looks to have come to terms with the U.S. government on settling a pair of government investigations into the company’s business practices. But the deal did not receive across the board praise from U.S. lawmakers.

Boeing agreed to pay the U.S. government $615 million to settle charges of ethical misconduct surrounding the U.S. Air Force’s Evolved Expendable Launch Vehicle (EELV) competition and the attempted hiring of a former Air Force acquisition official, the company and the U.S. Department of Justice announced May 15. Boeing will not admit wrongdoing under the agreement, though the company will pay $565 million to resolve potential civil claims and a $50 million monetary penalty.

The settlement stems from the actions of Darleen Druyun, the U.S. Air Force’s former top procurement official, who steered contracts to Boeing in exchange for a lucrative job managing their missile programs. An investigation found Druyun inflated costs in a deal to lease tanker aircraft to favor Boeing and she ended up serving several months in federal prison after admitting she did it in return for jobs for herself and her daughter.

Boeing also was under investigation for obtaining thousands of pages of documents from rival Lockheed Martin Corp. during the competition to develop a next-generation launch vehicle. The U.S. Department of Defense awarded contracts to both companies to develop separate rocket families under the EELV program, with Boeing and its Delta 4 vehicles winning the lion’s share of the first batch of 19 launch contracts over Lockheed Martin’s Atlas 5 vehicle. When details about Boeing’s alleged improprieties during the competition came out later, the government stripped Boeing of roughly $1 billion worth of launches for what it termed improper use of documents obtained from Lockheed Martin.

“The tentative agreement between Boeing and the United States Attorneys’ Offices provides that those offices will not seek any criminal charges against Boeing relating to the EELV, NASA and Druyun matters,” Tasia Scolinos, director of public affairs for the Department of Justice, said in a statement. “Boeing has agreed to accept responsibility for the conduct of its employees in these matters, pay a monetary penalty of $50 million, continue its cooperation with federal investigators, and maintain an effective ethics and compliance program, with particular attention to the hiring of former government officials and the handling of competitor information.”

Boeing may still be prosecuted or face a further penalty of up to $10 million if any executive commits a federal crime, and the company fails to report the incident, during the two-year terms of the settlement, which Doug Bain, Boeing senior vice president, Law, and Scolinos said is expected to be signed “in the next few weeks.”

Rep. Norm Dicks (D-Wash.), a top defense appropriator, believes Boeing’s settlement will help the company move past a “dark chapter” in its history and improve its chances for winning future Pentagon contracts.

“I am very pleased and I expect to see Boeing operating in a very ethical way in the future,” Dicks, whose Washington district is home to thousands of Boeing workers, told sister publication Defense Daily.

Sen. John McCain (R-Ariz.), a senior member of the Senate Armed Services Committee whose questioning of an Air Force tanker deal led to the uncovering of the Druyun scandal, has said he might call for Senate hearings into the settlement. “It may be worth of a hearing,” McCain told reporters May 16. McCain stressed he was “not judging” the settlement, but said he would discuss holding a hearing about it with committee Chairman John Warner (R-Va.).

Warner declined to comment specifically on the settlement, but told reporters he was saddened by the scandals.

Dicks and Sen. Patty Murray (D-Wash.), a member of the Senate Appropriations Committee, both dismissed calls for any hearings.” There no reason to do it,” Murray said. “It’s time to move on.”

Boeing and Lockheed Martin now are awaiting government approval to combine their respective U.S. government launch operations under a single entity dubbed the United Launch Alliance.

The joint venture, announced in May 2005, would combine services provided separately by the companies, with Lockheed Martin and Boeing each covering 50 percent of the costs and sharing 50 percent of the revenues, regardless of which rocket is used.

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