Charges Filed Against Ex-Boeing Engineers
Federal prosecutors filed criminal charges Wednesday against two former Boeing Co. employees for allegedly stealing trade secrets, escalating an investigation into allegations that the company illicitly obtained documents from archrival Lockheed Martin Corp. to win a multibillion-dollar missile contract.
As part of a highly unusual industrial espionage probe, former Boeing engineers Kenneth Branch and William Erskine were charged in U.S. District Court in Los Angeles with conspiracy, theft of trade secrets and violation of the federal Procurement Integrity Act. The allegations stem from a competition between Boeing and Lockheed in the late 1990s to win a contract for a new generation of missiles for the Air Force.
For the record:
12:00 a.m. July 4, 2003 For The Record
Los Angeles Times Friday July 04, 2003 Home Edition Main News Part A Page 2 National Desk 1 inches; 50 words Type of Material: Correction
Boeing contract -- A June 26 article in the Business section about criminal charges against two former Boeing Co. engineers incorrectly referred to a multibillion-dollar contract for a new generation of Air Force missiles. The contract actually involved rockets used to launch satellites; missiles were not part of the project.
According to a 26-page affidavit, Erskine recruited Branch, who worked for Lockheed at the time, to bring proprietary Lockheed documents to Boeing. In exchange for the documents, the affidavit says, Branch was promised a higher-paying job at Boeing.
“The charges against Mr. Branch and Mr. Erskine allege that they violated the fundamental rules of fair play,” U.S. Atty. Debra W. Yang said. “By covertly using a competitor’s secret information, they caused harm not only to Lockheed Martin but also to the Air Force and taxpayers who finance government operations. Their improper conduct had huge ramifications because of the value of the contract.”
Branch brought with him thousands of pages of documents, including cost rundowns of Lockheed’s rocket, potential profit margins and a detailed analysts of operations, according to the affidavit.
Branch and Erskine are expected to be arraigned next month. If convicted of all three counts, they each would face maximum penalties of 15 years in prison and fines of up to $850,000.
The two worked at Boeing’s Huntington Beach operations. Branch now lives in Florida; Erskine has moved to Northern California. Neither could be reached for comment.
Boeing spokesman Dan Beck said the company was “cooperating fully with the investigation.”
A spokesman for Lockheed, Tom Jurkowsky, said it would be inappropriate for the company to comment on the charges.
Boeing and Lockheed have been locked in a bitter five-year feud over the high-stakes competition to develop the so-called Evolved Expendable Launch Vehicle for the Pentagon.
In a major upset, Boeing in 1998 won the lion’s share of the launch contract, even though Lockheed had been a prime source of military rockets for four decades.
Boeing landed a contract to build 21 of 28 rockets, with the rest going to Lockheed.
Wednesday’s criminal filing may bolster a civil lawsuit Lockheed filed two weeks ago.
In the suit, Lockheed accuses Boeing, Branch and Erskine of illegally obtaining internal documents and using them to help win the rocket contract.
The Lockheed suit alleges that Boeing “unfairly” won the bulk of the rocket contracts, giving it a leg up on future contracts for both military and commercial launches, estimated to be worth $40 billion over the next 20 years.
If Lockheed wins its case, the company could try to recover the estimated $1 billion it spent developing the contract, plus any profit it lost from the rocket contracts.
Lockheed filed the lawsuit five weeks after Boeing acknowledged that it was under investigation by the Justice Department and the Air Force over allegations that its employees stole proprietary documents.
Lockheed, based in Bethesda, Md., is the nation’s largest defense contractor. Boeing, headquartered in Chicago, is the world’s largest commercial aircraft maker and the nation’s third-largest defense contractor. Boeing has about 35,000 employees in Southern California.
Three years ago, Branch and Erskine filed a wrongful-termination suit against Boeing, saying they had tacit consent from their bosses at Boeing when they used the Lockheed documents. A federal judge in Florida dismissed the case.
The Lockheed-Boeing case has prompted some highly unusual public moves in the typically staid industry.
Two weeks ago, Boeing Chairman Phil Condit placed full-page ads in major newspapers acknowledging for the first time that several employees “behaved unethically.” He asserted, however, that the incident was isolated and defended his company’s honesty and integrity.
On Wednesday, Boeing shares closed at $34.41, down 9 cents, while Lockheed fell 34 cents to $48.12 Both companies are traded on the New York Stock Exchange.
