Boeing faces $500m penalty for scandal

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The Independent Online

Boeing could be forced to pay damages of more than $500m (£285m) as a result of its employees' theft of documents from rival Lockheed Martin during a bid battle for a US military missiles contract.

The scandal, which occurred in 1998, came to light earlier this year and led to Boeing's being stripped of the contract and issuing a public apology. It pre-dated the latest Boeing scandal, over the hiring of former US Department of Defence official Darleen Druyun, which led earlier this month to the resignations of chief executive Phil Condit and chief financial officer Mike Sears.

Boeing faces a federal probe into the Lockheed case and it has emerged that the US Justice Department is considering bringing criminal charges against it and also taking out civil claims because of losses caused by the debacle.

While the maximum criminal fine would be $20m, the federal government estimates its losses run to $170m. Under US law, civil claimants can demand triple damages, so the total cost to Boeing could run to $530m before legal costs.

Last week the aerospace giant released two external reports into the Lockheed affair. One, from a Washington law firm, recommended 16 changes to improve ethical behaviour at Boeing. The other, from a business ethics consultancy, found culture clashes between older staff and those who arrived when Boeing made acquisitions in the 1990s.

The new chief executive, the veteran Harry Stonecipher, said the group was well on the way to implementing recommendations in the reports.

Its immediate problem is two contracts directly affected by the Druyun scandal. In the US a $26bn flight-refuelling contract, in which Ms Druyun was involved, has been put under review by Defense Secretary Donald Rumsfeld. In the UK a decision on a similar £13bn deal has been put on hold.

Boeing is bidding in a consortium with BAE Systems and BA, and is up against a rival bid led by European defence giant EADS. The Boeing team was believed to be favourite before the latest scandal blew up.