US, Boeing reach tentative 615 mln dollars settlement

WASHINGTON, May 16 (Reuters) Boeing Co. has tentatively agreed to pay the US government 615 million dollars to settle two high-profile criminal investigations and related civil claims, the US Justice Department said.

Under the deal, Chicago-based Boeing accepts responsibility for actions of its employees, but will avoid criminal charges as long as it abides by certain conditions for two years.

''Under the proposed agreement, Boeing will pay a total of 615 million dollars,'' said department spokeswoman Tasia Scolinos yesterday. The figure includes 50 million dollars in criminal penalties and 565 million dollars in civil claims.

''A written agreement will be drafted and is expected to be signed in the next few weeks,'' she said.

The deal ends over three years of government investigations into Boeing's recruitment of Darleen Druyun, a former top Air Force weapons buyer, while she was still overseeing billions of dollars of the company's contracts, and its appropriation of thousands of Lockheed Martin Corp. documents on a multibillion dollar rocket programmes.

A senior Justice Department official said the civil settlement to be paid by Boeing would likely to go to the US Air Force and NASA, agencies ''that were the subject of the fraud, the false claims and unjust enrichment by Boeing.'' Scolinos said the government could still prosecute Boeing for the Druyun matter, or impose an extra penalty of up to 10 million dollars, if a Boeing executive committed federal crimes during the next two years and Boeing failed to report the misconduct.

Boeing pledged to continue its cooperation with federal investigators, Scolinos said. The company promised to maintain an ethics and compliance programme, with a strong focus on the hiring of former government officials and the handling of competitor data, she added.

Boeing officials had no immediate comment. News of the agreement came ahead of Boeing's annual investor conference to be held tomorrow. Its stock fell 1.3 per cent to close yesterday at 85.86 dollars on the New York Stock Exchange.

The settlement amount was in line with market expectations, said defense consultant Jim McAleese, who noted that earlier reports had pointed to a settlement of around 750 million dollsrs.

The cost of the settlement will not be covered by Boeing's insurance, and the company will take a write-off against earnings, according to one source familiar with the plan.

Justice Department officials declined comment on the possible write-off, saying that was the company's concern.

''This is a good result for Boeing, in our view, and one important to obtain prior to the rebidding of the tanker programme,'' wrote Robert Stallard, a defense analyst with Banc of America Securities in an analyst note.

The Air Force last month asked industry officials for information about how to replace its aging fleet of aerial refueling tankers, the first step in a competition that could be worth 100 billion dollars over the long term.

Separate investigations were still ongoing of Boeing officials involved in other contracts handled by Druyun, one source said.

Justice Department officials declined comment.

The settlement comes after an extraordinary spate of scandals at Boeing that led to an executive reorganization, the firing and subsequent conviction of the company's chief financial officer, and the departure of two CEOs.

Former Boeing finance chief Michael Sears and Druyun both served time in federal prison for their roles in the scandal. At her sentencing, Druyun admitted inflating the price of a 23.5 billion dollars aerial tanker lease deal with Boeing. She also acknowledged steering other contracts to Boeing for hiring her daughter, son-in-law, and ultimately her.

REUTERS PG PM0546