CORPORATE CRIME REPORTER
Criminal Agreement – Odd and Unusual
20 Corporate Crime Reporter 28(1), July 5, 2006
It was 3:36 p.m. on Friday June 30.
The Friday before the July 4th holiday weekend.
Reporters were on their way out of town.
And into our e-mail box comes a press release from the Justice Department announcing that Boeing will not be criminally prosecuted for alleged criminal activity.
According to the press release, Boeing will pay a $50 million criminal penalty and $615 million in civil penalties to resolve federal claims relating to the company's hiring of the former Air Force acquisitions chief Darleen A. Druyun, by its then CFO, Michael Sears, and its handling of competitors information in connection with the Evolved Expendable Launch Vehicle (EELV) Program and certain NASA launch services contracts.
Attached to the press release was a copy of the nine-page civil settlement agreement .
But where's the non-prosecution agreement – the settlement agreement for the criminal side?
This non-prosecution agreement was not attached to the press release.
No answer from the United States Attorney in Alexandria Virginia.
No answer from the United States Attorney in Los Angeles.
No answer from the Justice Department.
After all, it was late Friday.
And then, after all, it was the Monday before the Fourth of July.
Finally, only today, Main Justice sends along the non-prosecution agreement .
And now it is clear why Boeing didn't want the document released.
In the agreement, which covers a two-year period, Boeing agrees not to commit any criminal offenses related to stealing of other companies' sensitive procurement information or the laws governing federal bribery, graft and conflict of interest.
But unlike the 50 or so corporate deferred and non-prosecution agreements that have preceded this one, Boeing's team of lawyers had inserted this item:
If a non-executive level Boeing employee violates the agreement, that's not a violation by Boeing.
Don't believe it?
Here's the exact wording:
“For the purposes of determining compliance with this agreement (as opposed to legal responsibility), the commission of a defined offense by a Boeing employee classified at a level below executive management as defined by Boeing's internal classification structure in place at the time of the execution of this agreement shall not be deemed to constitute the commission of a defined offense by Boeing.”
When told the provision, experts in the field expressed surprise.
“It's an odd and unusual provision,”said Ryan McConnell of Baker Botts in Houston who has closely followed the rise of corporate deferred and non-prosecution agreements. “I've never seen it before.”
“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.”
“Under this agreement, Boeing gets a pass,” said University of Connecticut Law Professor Leonard Orland. “It's pretty good negotiating. That's amazing. Nobody else has it.”
And then the Boeing lawyers inserted this:
That even if a Boeing executive violates the agreement, it's not a violation by Boeing if the company reports the violation to the federal government.
Don't believe it?
Here's the exact language:
“The commission of a defined offense by a Boeing employee shall not be deemed to constitute the commission of a defined offense by Boeing as long as the underlying allegation or conduct is reported by Boeing. . .”
The lawyers for Boeing did not return calls seeking their interpretation of these provisions.
Those lawyers, as listed in the non-prosecution agreement, are:
Brad Brian and Jerome Roth of Munger Tolles & Olson.
Stephen Preston and Jamie Gorelick of Wilmer Cutler Pickering Hale and Dorr.
And Richard Cullen of McGuire Woods.
Only Boeing's Tim Neale would speak on the issue.
“We're not going to comment on what the provisions mean,” Neale said. “The agreement speaks for itself.”
Well it does.
It means that over the past couple of years, we have gone from convicting corporate criminals for corporate crimes, to allowing them to get off with deferred and non prosecution agreements, to the low point of the Boeing non-prosecution agreement, which says that even if Boeing violates the agreement, it's not a violation.
Federal prosecutors in Washington, D.C., Alexandria, and Los Angeles did not return calls seeking answers to some questions, like:
Why wasn't the Boeing non-prosecution agreement promptly released along with the civil agreement?
Did Boeing lawyers request that the non-prosecution agreement not be released?
Why did federal prosecutors agree to the loophole ridden non-prosecution agreement?
Awaiting your call.
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