Boeing, Justice Dept. reportedly in talks to settle misconduct case

Aerospace firm may avoid criminal charges but could face $500 million fine

September 10, 2005|By Susan Chandler | Susan Chandler,CHICAGO TRIBUNE

James McNerney, Boeing Co.'s new chief executive, is working hard to put behind him the defense-related scandals that bedeviled his two predecessors.

The Chicago-based aerospace manufacturer is hammering out a comprehensive settlement with the Justice Department, according to two people familiar with the matter. Under the agreement being discussed, Boeing would not face criminal charges, something companies have been keen to avoid since an obstruction-of-justice conviction led to the demise of accounting giant Arthur Andersen, one of the sources said.

Boeing might end up paying a fine as large as $500 million, which would be one of the biggest penalties levied on a U.S. company for misconduct.

"That's a target," said one person familiar with the case. It's possible, the person added, that Boeing may not be forced to admit wrongdoing as part of the settlement.

Boeing declined to comment yesterday on its negotiations with the Justice Department but said it was continuing "to cooperate fully with the government." No agreement is imminent, one person familiar with the situation said.

Justice Department officials could not be reached for comment.

In February, Boeing brought in two high-powered East Coast attorneys to gear up its settlement efforts - Richard Cullen, a former Virginia attorney general, and Jamie Gorelick, a former high-ranking Justice Department official and member of the 9/11 Commission.

Boeing's legal troubles date back to 2003, when the company was suspended from building rocket launchers because it had thousands of proprietary documents from rival Lockheed Martin Corp. in its possession when bidding on the launch contracts.

The suspension was expected to be temporary, but it stretched to almost two years as Boeing became involved in a second defense-related scandal related to a $24 billion Air Force contract for aerial refueling tankers.

That contract was thrown out by Congress last year after a former Air Force procurement official, Darleen Druyun, admitted she had increased the price as a "parting gift" to Boeing, where she went to work after retiring from the government.

In late 2003, Michael Sears, Boeing's chief financial officer, was fired after the company uncovered e-mail showing he had been wooing Druyun while she was still handling billions in Boeing contracts, a violation of federal contracting laws. Boeing Chief Executive Officer Phil Condit resigned a week later.

Federal prosecutors in Virginia charged Sears and Druyun with criminal conduct and both pleaded guilty. They began serving prison sentences this year. No other Boeing executives have been charged in the case.

McNerney is eager to move on, company insiders say. Boeing's business is booming these days, giving it the financial leeway to pay a big fine, although a mechanics' strike at its commercial aviation unit is becoming more worrisome as it stretches into its second week.

The Chicago Tribune is a Tribune Publishing newspaper.

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