Racket Science

Lockheed says in a civil suit that Boeing's competitive behavior constitutes racketeering. Is a criminal probe next?

Is there a federal criminal racketeering case in Boeing's future? Attorneys for Lockheed Martin outlined that possibility in court papers filed in Florida. Lockheed is suing Boeing, claiming its aerospace and defense rival conspired to steal business secrets and cover up the act, allegedly a violation of the U.S. Racketeer Influenced and Corrupt Organizations (RICO) Act. Lockheed contends Boeing used stolen Lockheed documents to gain an edge in a multibillion-dollar Air Force satellite contract. It is seeking to discover expanded evidence of "overt acts" stemming principally from continuing U.S. investigations into the Boeing aerial-refueling-tanker lease deal. Court documents also refer to a separate federal grand jury probe involving Boeing in Los Angeles. Lockheed maintains that incidents related to these cases can be linked to show a 14-year "pattern" of illegal activity by Boeing.

Federal officials won't discuss pending court action or probes. But Lockheed's civil case is based on the same statutes that federal prosecutors could use in a criminal RICO action. The basic differences in civil and criminal RICO actions are procedural, and federal prosecutors can bring either civil or criminal claims; criminal penalties include up to 20 years in prison and civil penalties allow for treble damages. The RICO statute says a pattern of racketeering is defined by two or more related acts that amounted to—or merely posed—a threat of criminal activity. In the ongoing Boeing tanker investigation by more than a half-dozen federal agencies, two Boeing officials have pleaded guilty to criminal violations. One of them, ex-Pentagon official Darleen Druyun, last month confessed to illegally giving Boeing favorable treatment on at least five government contracts worth billions of dollars in exchange for jobs at Boeing for herself, her daughter, and her son-in-law.

According to copies of papers filed in U.S. District Court in Orlando, Lockheed now hopes to take a deposition from Druyun and include evidence from the tanker investigation to support its civil RICO case. Lockheed attorneys note that Druyun, the Air Force's No. 2 acquisition officer before she became a Boeing vice president, admitted "that she and Boeing had in fact engaged in a course of conduct involving bribery and gratuities" and, in the tanker case, admitted to illegally passing a competitor's (Airbus) proprietary information to Boeing—"precisely the same method" Boeing allegedly employed in the Lockheed secrets-theft case. Additionally, Lockheed claims Boeing also broke laws using the mail and interstate commerce to further the illegal conduct. Taken together, those and other acts "show a pattern of racketeering activity ranging over 14 years," Lockheed contends.

Boeing, which is resisting Lockheed's bid to take Druyun's deposition, disagrees down the line with Lockheed and contends the acts are "wholly separate and unrelated." Boeing maintains that Druyun's illegal actions were not approved or condoned by the company and were committed in concert only with former Chief Financial Officer Mike Sears, who also has pleaded guilty to federal charges. Druyun's wide-ranging October confession "came as a total surprise," Boeing said in a statement. Lockheed, however, contends in court papers that Druyun's actions were known even to Boeing Chief Executive Harry Stonecipher. Lockheed claims Stonecipher was aware of Druyun's Pentagon favors before she came to work at Boeing in January 2003 and that Lockheed has a copy of a Stonecipher e-mail "admitting that Darleen Druyun had favored Boeing in the past." Lockheed also claims Stonecipher received proprietary Lockheed records during a 1998 meeting with Druyun. Pre-trial hearings continue in the Orlando case.


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