Saturday, September 10, 2005

Boeing Nears a Deferred Prosecution Agreement

Taking advantage of the Department of Justice's new-found fondness for deferred prosecution agreements for corporations, Boeing Co. is reportedly close to settling two government investigations that will require the company to pay upwards of $500 million and, if form holds, appoint an outside monitor and agree to certain restrictions on its operations.  The government has investigated Boeing for the conduct of its former CFO in recruiting a senior Pentagon procurement official that resulted in both individuals pleading guilty and being sentenced to short prison terms.  In addition, Boeing improperly obtained secret documents from rival defense contractor Lockheed Martin that it used in formulating its bids.  The Department of Defense stripped Boeing of some of its contracts, and the company came in for withering criticism from Sen. John McCain over its practices, including efforts to vilify the Senator. An AP story (here) discusses the settlement negotiations.

The recruitment problem was a black eye for the company, but had little long-term effect, probably no more than the sudden resignation of then-CEO Harry Stonecipher earlier upon the revelation that he was having an affair with a subordinate employee.  The Lockheed document issue cost Boeing revenue and, more importantly, credibility.  The deferred prosecution agreement, even with the fine, is a comparatively small price to pay to put the two investigations behind it. (ph)

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