USAF Hands Down Contractor Penalties In Industrial Sabotage Case

After a year-long investigation, the Air Force today slapped Boeing with some of the harshest penalties ever.  Boeing has been stripped of seven Delta IV launches in the Evolved Expendable Launch Vehicle Program to archrival Lockheed-Martin.  Three of Boeing's business units have been indefinitely suspended from doing business with the Pentagon.

All of this, Boeing faces for what amounts to industrial sabotage. The Air Force investigation concluded that Boeing only won a majority of EELV launch contracts because it used thousands of pages of stolen Lockheed-Martin documents in the process. 

"Our inquiry into Boeing found that they were in possession of thousands of pages of Lockheed Martin proprietary EELV documents during the 1998 source selection," said Peter B. Teets, undersecretary of the Air Force.

"As a matter of policy we do not tolerate breaches of procurement integrity and we hold industry accountable for the actions of their employees. We believe the suspension is necessary and we hope all contractors will take note and strive to enforce the highest integrity standards in their organizations."

Naming Names

The Air Force also suspended three individuals from competing for contracts -- William David Erskine, former ground operations lead on Boeing's EELV program; Kenneth V. Branch, former senior engineer and scientist on Boeing's EELV program; and Larry Dean Satchell, a former member of Boeing's EELV proposal team. 

Last month, a federal grand jury in Los Angeles indicted Erskine and Branch on charges of misusing trade secrets.  Prosecutors say Erskine recruited Branch from Lockheed, promising him a very comfortable salary in exchange for access to Lockheed secrets. 

The sanctions against Boeing Launch Systems, Boeing Launch Services and the Delta rocket program office are open-ended. They'll end only when Boeing can prove it's changed its corporate ways.

Boeing Responds

In a written statement to ANN, Boeing CEO Phil Condit said, "We are extremely disappointed by the circumstances that prompted our customer's action, but we understand the U.S. Air Force's position that unethical behavior will not be tolerated. We apologize for our actions. We will continue to work with the Air Force to address the issues that caused this suspension.

"Last week, I asked former Senator (Warren) Rudman (D-NH) to review the company's policies and procedures regarding ethics and the handling of competitive information. His review will include looking at any management or cultural factors that could affect how these policies and procedures are respected and enforced.

"To reinforce the impact unethical behavior has on the customer and the company, a stand-down will take place on July 30 for all 78,000 employees in our Integrated Defense Systems business unit. These employees will be briefed on today's action taken by our Air Force customer and the events that caused it, and participate in specialized interactive ethics and procurement integrity training.

"As I've said before, I am proud of the 160,000 men and women of The Boeing Company. The unethical conduct that led to this action does not reflect the high standards that we exhibit day-in and day-out to our customers, suppliers and communities. We want to ensure that Boeing will never again have to face such criticism."

Ouch...

FMI: www.boeing.com, www.af.mil