U.S. Sues Boeing Over Payments to Executives : Justice Dept. Says Five Got $485,000 in Severance After Taking Defense Jobs

The Justice Department filed a civil action Tuesday alleging that five former Boeing Co. executives violated federal conflict-of-interest rules when they received severance payments from the company totaling $485,000 after taking high-level Pentagon jobs in 1981 and 1982.

The lawsuit, seeking recovery of the funds, charged that Boeing and its former executives were involved in “a breach of the fiduciary duty of undivided loyalty that each employee owed the United States as his employer.”

However, no criminal charges were brought against the company nor any of the officials. The suit noted that there is no evidence that any of the officials had sought to favor Boeing during his government employment.

Fifth-Largest Defense Contractor

Two of the people named in the suit are still government officials: Melvyn R. Paisley, an assistant secretary of the Navy for research, engineering and systems, and Lawrence H. Crandon, an overseas official of the Defense Department’s North Atlantic Treaty Organization air command and control system.

The other three are T. K. Jones, who was deputy undersecretary of defense for strategic and nuclear forces; Herbert A. Reynolds, former deputy director of space and intelligence policy for the undersecretary of defense, and Harold Kitson Jr., who was deputy assistant secretary of the Navy for command, control, communications and intelligence.

Boeing is the nation’s fifth-largest defense contractor, producing bombers and missiles for the Defense Department, and is the world’s leading manufacturer of commercial aircraft.

Neither Boeing nor any of the officials named had immediate comment on the lawsuit. “We are in no position to comment until we see the actual complaint,” Boeing spokesman Craig Martin said at corporate headquarters in Seattle.

Payments Made During 1981 and 1982

Richard K. Willard, assistant U.S. attorney general in charge of the Justice Department’s civil division, said the action seeks recovery of the payments from both Boeing and the individual defendants. Boeing, in effect, had been reimbursed for the payments by the Defense Department because it included them as overhead costs in some of its defense contracts.

These payments to the defendants as they entered government service were listed: Paisley, $183,000; Crandon, $40,000; Jones, $132,000; Reynolds, $80,000, and Kitson, $50,000.

The department said the payments, which were all made during 1981 and 1982, reflected “primarily the difference between the pay and benefits each executive would have received if he had stayed with Boeing and what he would be receiving with the government.”

The complaint added: “By doing this, Boeing created a conflict of interest by effectively supplementing the executives’ government pay.”

Besides making up the difference between their corporate and government pay, the severance formula also considered the amount that each employee would not be paid by Boeing as part of various savings, stock bonus and other employee benefit plans and the difference in the cost of living between the Seattle and Washington areas, department officials said.

The lawsuit noted that payments to the defendants “were not made pursuant to a severance payment policy applicable to all Boeing employees.” It said that “computation of the amount paid to each employee was based almost exclusively . . . on the difference between the pay and benefits each man would receive if he remained with Boeing and the pay and benefits he would receive as an employee of the United States.”