In mid-May 2006, the Boeing Co. tentatively settled with the Department of Justice (“DOJ”) for $615 million as a result of Boeing’s alleged abuses of the public contracting process.
As in the case of Insight Public Sector (detailed in our April 5, 2006 issue), government contractors may end up paying hefty penalties for violation of federal procurement laws. In Boeing’s case, the settlement is perhaps the largest that a defense contractor has ever had to pay, and it potentially concludes two separate ethics inquiries by the government. The first involved Boeing’s illegal possession of, according to the Washington Post, “thousands of pages of rival Lockheed Martin Corporation’s proprietary documents during a 1990s competition to launch government satellites.” As a result, Boeing was also barred from similar Air Force business for a year. The second inquiry resulted from an improper business relationship with Darleen Druyun, a high-ranking Air Force acquisitions official, who admitted that she steered business to Boeing at least in part because of discussions she had had with Boeing regarding her own possible employment with the company. Boeing thereafter lost a $20 billion contract that Druyun had been overseeing.
One DOJ official involved in the settlement negotiations stated that the government “felt this was an appropriate resolution of the two cases.” However, Boeing will have to comply with a number of additional requirements, including the operation of “an effective ethics and compliance program, with particular attention to the hiring of former government officials and the handling of competitor information,” according to DOJ public affairs director Tasia Scolinos. In addition, according to Scolinos, Boeing will need to continue its cooperation with government investigators, as well as ensure that in the next two years “no executive management employee of Boeing commits federal crimes as outlined in the tentative agreement” reached with the DOJ. Such a violation could result in both criminal prosecution and a fine of up to $10 million.
Senator John Warner (R-VA), recently stated that, as a result of the Boeing matter, the Armed Services Committee would conduct hearings on the practices of defense contractors in the aerospace industry to ensure that such a scandal would not happen again.
This update is published by Venable LLP. Venable publications are not intended to provide legal advice or opinion. Such advice may only be given when related to specific fact situations. © Copyright by Venable LLP 2006.