Consumer Fraud

The Fraud List: Boeing Doing Business As Usual

the fraud list 370x210 The Fraud List: Boeing Doing Business As UsualFour Boeing Company employees who detected and documented years of fraudulent billing practices aimed at cheating the U.S. government out of defense funds filed a whistleblower lawsuit against the company under the False Claims Act in 2009. That lawsuit led to extensive federal investigations and months of litigation that ended with a $23-million settlement in October 2014.

But that whistleblower case and subsequent settlement were not the only times Boeing has run afoul of federal prosecutors. Boeing, in fact, is one of the worst repeat offenders of U.S. laws and regulations governing the conduct of federal contractors, with a long rap sheet of contract violations, civil and criminal penalties, whistleblower settlements, labor disputes, environmental offenses, product safety and export violations, and a history of manipulating states and cities for bigger, better tax breaks and subsidies.

If Boeing were a person, it would be labeled a thug, gangster, thief, and bully … a fraud. But the Chicago-based company is also a provider of valuable domestic high-tech and manufacturing jobs, which means U.S. regulators tend to overlook past crimes and violations and instead award the company with even more lucrative contracts. Rather than clean up its act, the process repeats itself. Boeing wins and American taxpayers pay the price.

A History of Fraud

The case that led to the $23-million settlement last October alleged Boeing overcharged the Defense Department for maintenance work on C-17 Globemaster airplanes, which provide one of the U.S. Armed Forces’ major means of transporting troops and cargo around the world.

The employees furnished federal prosecutors with evidence that Boeing intentionally billed the government for labor hours charged simultaneously to multiple jobs. The whistleblowers also provided evidence that Boeing continued to charge the government for hours on jobs that had already been completed, charged hours to the wrong jobs, and billed for aircraft maintenance time that was actually spent on other tasks that didn’t qualify as legitimate charges under the contract terms.

After the settlement, Boeing denied any deliberate wrongdoing, claiming the false billing was “a matter of inadequate charging discipline” and vowing to retrain its employees.

But Boeing’s history of False Claims Act violations speaks for itself.

  • On January 20, 2012, Boeing paid $4.4 million to settle whistleblower claims filed by Boeing employee Vincent A. DiMezza, Jr., who similarly alleged that the aircraft manufacturer engaged in a scheme that inflated hours for work spent on Chinook helicopters, then fraudulently billed the Defense Department for that time. The whistleblower lawsuit also alleged that Boeing billed the government premium rates for basic mechanical work, causing the U.S. to pay Boeing for extra work that was already covered by the government contract and included in the contract payments it received.
  • Just months before that settlement, Boeing paid the U.S. $2 million to resolve claims that it violated the False Claims Act, again by inflating its charges and overbilling the government for work performed on Air Force KC-135 tanker airplanes in San Antonio from 2002 to 2005. The Boeing employee who filed the whistleblower lawsuit also alleged that Boeing fraudulently adjusted its billing records to inflate the number of workers who performed maintenance on the tankers. Boeing settled the suit with the U.S. on August 17, 2011.
  • Boeing paid $25 million to settle a False Claims lawsuit on July 9, 2009, in which whistleblowers Anthony Rico and Fernando de la Garza, two of the whistleblowers who filed the lawsuit Boeing settled last October for $23 million, accused the company of billing the government for work it never performed or performed improperly on 59 KC-10 aircraft.
  • A settlement Boeing and U.S. prosecutors reached on June 30, 2006, required Boeing to pay $615 million – the largest single settlement on Boeing’s long rap sheet. The agreement resolved civil and criminal allegations that the company improperly used competitors’ information to land billions of dollars in contracts with the Air Force and NASA. The agreement also mandated that Boeing “maintain an effective ethics and (regulatory) compliance program,” which obviously failed to work, considering the company’s ongoing offenses.
  • Prior to that massive settlement, Boeing paid $140.5 million to settle four other cases alleging fraud and other misconduct going back to 1989. One case, settled in August 2004, required Boeing to pay $6 million to resolve allegations that it made U.S. military aircraft with Russian titanium instead of the U.S. equivalent.

Other settlements Boeing reached with the U.S. over the years included allegations that it installed defective gears in CH-47D Chinook helicopters that it sold to the U.S. Army, which caused some of the aircraft to crash; and that it illegally obtained classified Pentagon planning documents, on top of numerous other allegations of systematic, fraudulent overbilling on government contracts and other crimes and violations.

Coming Up Next:

Next week’s installment of The Fraud List will feature another repeat offender of the False Claims Act, Northrop Grumman. A new story in this series will be published each Thursday at 1 p.m. CST. Follow #thefraudlist on Google+, Facebook and Twitter.

Taxpayers Against Fraud
Corporate Research Project
Righting Injustice
U.S. Attorney’s Office
U.S. Department of Justice
Law 360
U.S. Department of Justice
Associated Press
New York Times