Court OKs Big Boeing Bonuses to U.S. Appointees

In a decision that narrows government conflict-of-interest rules, the Supreme Court said Tuesday that a corporation may give employees who are about to take top federal positions special bonuses of more than $100,000.

In a 9-0 ruling, the court said that the legal ban on giving outside pay to government officials applies only to those who are on the job, not those who are scheduled to get positions.

The decision spares five former Boeing Co. employees from having to repay $485,000 in bonuses that were awarded just before they joined the Ronald Reagan Administration in 1981.

The highest payment, $183,000, went to Melvyn R. Paisley, who left Boeing to become assistant secretary of the Navy for research, engineering and systems. Paisley became one of the Defense Department’s chief purchasing officers and in 1988 became a target in the Pentagon procurement scandal. Paisley has denied allegations of wrongdoing and has not been charged with any crime.

The case decided by the court Tuesday began before the Pentagon procurement case was disclosed and is not directly related to it.

Boeing contended that its severance payments to Paisley and the four others were intended to encourage them to pursue government service and to compensate them for an expected drop in salary.

But, in 1986, the Justice Department filed a civil suit against Boeing and the five employees, charging that the payments violated conflict-of-interest rules and could be seen as a bribe to influence high federal officials. Under federal law, government officials are “payable only by the United States” and may not receive “any contribution to or supplementation of salary” from anyone outside the government.

A federal judge in Alexandria, after hearing the evidence, concluded that the bonuses were severance payments and dismissed the complaint. In 1988, however, a federal appeals court in Richmond concluded that the bonuses were intended to add to the compensation of the five officials and, therefore, were illegal. It would have forced the five to pay the money to the U.S. Treasury.

In reversing that judgment Tuesday, the Supreme Court ruled that the law, read literally, applies only to government officials, not to appointees waiting to take office.

“None of the five individuals was a government employee at the time he received his severance payment,” Justice John Paul Stevens said for the court (Crandon vs. U.S., 88-931). He pointed out that none of the five were charged with giving Boeing “any favored treatment,” nor were they said to have participated in any government decision that benefited Boeing.

Paisley left the Defense Department in 1987 and has retired, his attorney said. The four other employees were Thomas K. Jones, who received $132,000 before becoming deputy undersecretary of defense; Herbert A. Reynolds, $80,000, before becoming deputy director of space and intelligence policy; Harold Kitson, $50,000, before becoming deputy assistant secretary of the Navy; and Lawrence H. Crandon, $40,000, before becoming a computer scientist for NATO’s air command.