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Boeing's dealings detailed in memo

By Peter Pae
Los Angeles Times

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An internal Air Force memo suggests a pattern of improprieties by Boeing when it bid on Pentagon contracts, apparently contradicting the aerospace giant's assertions that such problems were isolated and that it corrected them quickly.

According to the memo, Boeing misled federal investigators and lied about the number of documents Boeing employees stole from rival Lockheed Martin to win a lucrative rocket contract.

The Air Force hit Boeing last summer with one of the harshest penalties ever imposed on a defense contractor when it took away about $1 billion in rocket contracts and indefinitely suspended the company from bidding on future rocket deals.

The 10-page memo offers details on the rocket contract scandal, saying that thousands of pages of Lockheed Martin documents gave Boeing an unfair advantage to develop a new generation of rockets known as Evolved Expendable Launch Vehicles, or EELV.

The memo says that "an independent team of pricing experts determined" that the documents helped Boeing calculate Lockheed's bid within 2.4 percent of the offer.

The memo also reveals for the first time how the Air Force in 1999 considered suspending Boeing for having in its possession proprietary papers from Raytheon when the two rivals were competing for a missile defense program contract.

"Boeing's misuse of a competitor's proprietary documents ... is not unique to the EELV program," Steven Shaw, the Pentagon's deputy general counsel, says in the memo.

It is included in a recent court filing in a civil lawsuit filed by Lockheed against Boeing in federal court in Orlando.

As Boeing was on the verge of winning the rocket contract, the memo says another Boeing "capture team" was busy reviewing, analyzing and copying the proprietary documents laying out Raytheon's proposal for a missile defense system.
 
They were inadvertently left at Boeing's Downey, Calif., facility by an Army official in 1998. A Boeing software engineer discovered the file, but instead of destroying it "or returning it to Raytheon or the Army," it was copied and analyzed, according to the memo.

At least one Boeing employee was involved in both the Lockheed and Raytheon incidents, according to the memo.

Boeing's apparent failure to abide by its assurances to report and deal with improper activities angered Air Force officials and compounded the penalty in the Lockheed EELV case, said a source familiar with the Air Force discussions.

A Boeing spokesman declined to comment yesterday on the Air Force memo because he had not seen it. Boeing stands by its position that the theft of Lockheed documents involved only "a handful of its employees" and that Boeing has aggressively implemented an overhaul of its ethics policies, said the spokesman, Dan Beck.

"We took the suspension very seriously, and since then Boeing has continued to cooperate fully with the Air Force," Beck said.

Boeing CEO Harry Stonecipher said this month that a tentative agreement had been reached with the Air Force to restore Boeing's status as a rocket contractor and that he expected the Air Force to make a formal announcement within a "few weeks."

The Air Force memo says at least one Boeing senior executive possessed a Lockheed document and that another executive may have encouraged their pilfering.

In addition, the memo says, Boeing's management continually misled the Air Force and provided "false statements."

Early on, the Air Force said Boeing led it to believe the company had only two sets of Lockheed documents. Later, Boeing acknowledged having two boxes. But Boeing actually had eight boxes, according to the memo.

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