Alleged Result of Theft: Boeing Got Most EELV Launches From DOD

Two fired Boeing employees have been indicted on charges they won a major DOD contract by stealing documents from arch-rival Lockheed-Martin. The grand jury returned the criminal indictment against former Boeing managers Kenneth Branch, 64, and William Erskine, 43, for the misuse of proprietary Lockheed Martin Co. documents during bidding for Air Force launch contracts.

The two, who were managers in the Evolved Expendable Launch Vehicle (EELV) program, were charged with conspiracy to conceal and possess trade secrets by a federal grand jury in Los Angeles. If convicted, both men face a maximum of 10 years confinement and a fine of $250,000, or both.

Branch's attorney, Richard M. Steingard, said in a prepared statement after the indictments were handed down, "Although Mr. Branch and I are deeply disappointed that the government has decided to charge even one count of criminal misconduct, we have no intention of litigating the case in the media and will only address the allegations in court."

"The potential theft of proprietary data is a specter that can strike at the very foundation of any competitive system designed to ensure quality while containing costs," said Joseph E. Schmitz, Department of Defense inspector general. "Competitions to design and build the most advanced military systems in the world for the Department of Defense have a potential value of billions of dollars per year. Part of the mission of the DCIS special agents is to investigate allegations to ensure that the integrity of commercial competitions are strictly maintained and that a fair playing field is maintained among defense contractors."

In 1997, the Air Force announced contracts for EELV services to both Boeing and Lockheed Martin. The Air Force agreed to provide each company with $500 million for development costs associated with their respective EELV programs, with both companies agreeing to pay any additional developmental costs.

In 1998, of the 28 initial EELV launches, Boeing won 19 of the launches while Lockheed won nine. The EELV program uses the Lockheed Atlas or the Boeing Delta rocket systems to launch government satellites into space for national security interests as well as for the transportation of commercial satellites.

In 2002, upon learning about the loss of proprietary documents, Lockheed Martin alerted the Air Force, which, in turn, informed the DCIS. DCIS and OSI then launched an investigation into the theft and referred the case to US Attorney Debra W. Yang for the Central District of California.

Boeing: Clean So Far

To this point, there's no indication that Boeing itself will face federal charges, but the case is still relatively young. After both Erskine and Branch were fired, they filed wrongful termination suits againgst the company. A federal court last year dismissed both cases.

Boeing even took the extraordinary step of placing full-page ads in major newspapers, apologizing for the conduct of its employees, but reaffirming CEO Phil Condit's believe that Boeing itself is clean.

But even if Boeing survives the criminal inquiry relatively unscathed, it's not out of the legal woods yet. Lockheed filed a federal lawsuit last month against Boeing, the two managers and another former employee.

FMI: www.boeing.com, www.defenselink.mil/news/dodnews.html