The Boeing Scandal After the Boeing Scandals

The Boeing Scandal After the Boeing Scandals
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The United States treats its petty criminals harshly, and not just the worst offenders.

If you get caught selling small amounts of marijuana, or get caught stealing on a couple occasions, you are liable to get a significant jail term. Once you get out, you may well find you have to pay thousands of dollars in court costs and other fees. Get placed on probation, and you may have to pay the costs of your probation officer.

You may be deprived of your right to vote. You will find it very hard to get a job.

On the other hand, the crimes of corporations get treated with kid gloves. Leave aside for a moment the treatment of individual executives -- that's a topic for another day -- to consider how light the treatment is for corporations that commit crimes.

The latest evidence is a remarkable deal the government just entered with Boeing.

In May, the Justice Department announced a tentative agreement with Boeing to resolve two entirely separate and quite serious cases of apparent criminal wrongdoing.

The deal looked scandalous in May. But then the final agreement was announced just before the July 4 weekend, and it turns out to be worse than anyone could have anticipated.

Both of the instances of Boeing's wrongdoing involved major offenses against the U.S. government and U.S. taxpayers. They both involved projects of considerable importance to Boeing. And in both cases the company's conduct was extraordinarily egregious; these were not failures to comply with arcane rules, but theft of a competitor's proprietary data to facilitate bid-rigging and a quid pro quo arrangement with a government contracting officer to facilitate a massive government overpayment for a weapons system of very questionable benefit.

In the Evolved Expendable Launch Vehicle Program scandal, Boeing acquired 25,000 pages of bidding documents from its sole competitor, Lockheed Martin. It then used the information to set its bids just below those of Lockheed. The government and taxpayers were thus cheated of the benefits of genuine competition.

In the elaborate Darleen Druyan affair, Air Force contracting officer Druyan admitted doing a variety of "favors" for Boeing. In the Pentagon's misguided deal to lease rather than buy tankers from Boeing, Druyan admitted that she "agreed to a higher price for the aircraft than she believed was appropriate." Boeing reciprocated for these gifts -- ripoffs of taxpayer money -- by hiring her. Her hiring was managed at the highest levels of the company, involving then-Chief Financial Officer Michael Sears.

Despite the gravity of the corporate wrongdoing in the two cases, Boeing is going to get off with payment to resolve civil claims and a $50 million "monetary penalty." Not a criminal penalty, mind you, because Boeing is not being charged with any crimes, nor acknowledging that it might have been, based on the evidence. The company gets to avoid the reputational harm of a criminal plea -- or even a criminal charge -- and Lockheed won't be able to use any Boeing concession of criminal wrongdoing in the companies' ongoing civil litigation (which, incidentally, might be resolved by the two firms' rocket launch divisions merging).

Non-prosecution deals like the Boeing agreement are the norm, not an exception. My frequent co-author Russell Mokhiber of Corporate Crime Reporter issued a study this past December which found that there were at least 34 non-prosecution and deferred prosecution agreements with large corporations between 1992 and 2005 -- with more than two thirds of the cases occurring since 2002.

But there are a few novel features of the Boeing deal.

First, it settles two entirely separate cases at once. One factor the Department of Justice is supposed to use in deciding whether to prosecute criminally is whether a company is a repeat offender. Here, we know Boeing is -- because the no-prosecute deal itself resolves repeat offenses.

Ralph Nader and I have written to Attorney General Alberto Gonzales, asking him to undo the Boeing deal and formally reassess the routinized use of deferred prosecution and non-prosecution agreements for large corporations. Our letter is here.

The basic idea behind non-prosecution or deferred prosecution deals is that prosecutors can extract commitments for corporate reforms that are more far-reaching than what they would have achieved with a criminal prosecution. A key element in all of these deals is that the company benefiting from the deal promises not to repeat the behavior that got them in trouble in the first place.

The second novel feature of the Boeing deal is how Boeing's lawyers restricted this pledge. As Russell Mokhiber first noted, under the terms of the actual agreement -- which the Justice Department only made available after Russell harrassed them -- if a non-executive level Boeing employee violates the agreement, that doesn't count as a violation by Boeing. "Drawing the line between executives and other employees is a little crude," said Columbia University Law Professor John Coffee. "I don't think you want to tell non-executive employees they are legally immune and can't get the company in trouble. You want the company monitoring all employees." That's not all. Under the terms of the actual agreement, if an executive commits a violation but the company turns them in, that doesn't count as a violation either. Russell and I wrote about these remarkable provisions -- which means to a considerable extent that Boeing can't violate the agreement with the Justice Department even if it does violate the agreement -- here.

While Congress is going through the Kabuki dance of considering flag-burning amendments, the real business of Washington goes on.

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