<http://online.wsj.com/article_print/0,,SB110989094930969984,00.html>
The Wall Street Journal March 4, 2005 U.S. BUSINESS NEWS Air Force to Let Boeing Bid Again By ANDY PASZTOR Staff Reporter of THE WALL STREET JOURNAL March 4, 2005; Page A3 After 20 months on the Pentagon's blacklist in the wake of an ethics scandal, Boeing Co. is soon slated to be reinstated by the Air Force as a good corporate citizen and permitted to again bid on government rocket contracts, according to military and industry officials. The move has important implications for the Chicago aerospace company, the global rocket business and U.S. space programs. In the short term, it also is bound to provide a public vote of confidence in Boeing's enhanced ethical safeguards, while removing another major hurdle for a comprehensive settlement of various criminal and civil investigations pending against the company. Determined to lift the suspension on new launch contracts for Boeing, acting Air Force Secretary Peter Teets is taking the final steps to clear the decision with other Pentagon offices, including the Air Force general counsel and Deputy Defense Secretary Paul Wolfowitz, these officials said. Barring a last-minute change of heart, an announcement could come any day. "We feel confident that we've done everything required to meet the conditions" for lifting the suspension, a Boeing spokesman said. "We're just waiting for the Air Force to give us the word." An Air Force spokeswoman had no comment. Boeing's stock yesterday reached its highest level since August 2001, rising as much as 4.5% to $57.78 in the early afternoon. By 4 p.m. in New York Stock Exchange composite trading, its shares had dipped to $57.42, still up $2.12, or 3.8%. Analysts attributed the rise to growing optimism about increased jetliner orders from outside the U.S., as well as positive comments from Pentagon officials about the company's Future Combat Systems and rocket programs. The anticipated Air Force decision would eliminate a legal cloud that has hung over Boeing since July 2003, when Mr. Teets stripped roughly $1 billion of military-launch contracts from the company and barred it from new rocket business. The punishment was meted out after it was determined that Boeing illegally snared boxes of proprietary Lockheed Martin Corp. rocket documents and then, according to the Air Force general counsel's office, repeatedly misled the government about the extent and nature of the wrongdoing. Boeing would be able to compete against Lockheed, which got Boeing's canceled orders, for a share of up to $3 billion in future rocket business the Air Force wants to award this year. >From a broad policy perspective, the decision would buttress the Bush administration's long-term goal of supporting two rival families of rockets to guarantee that government satellites will have a reliable way to reach orbit. Mr. Teets told members of the Senate Armed Services Committee yesterday that Boeing "has taken strong corrective action" and "I believe that we are in the near term ready to lift that suspension." Throughout the controversy, Boeing Chief Executive Harry Stonecipher personally assured the Air Force the company was making changes. The company months ago revamped its ethics training, hired an outsider to oversee compliance and agreed to a myriad other Air Force demands to demonstrate its desire to put the ethical stain behind it. Additional steps, including further protections against acquisition of illicit documents, new rules for internal investigations of suspected wrongdoing and mandatory reports to the military, are expected to be part of the final agreement. A prime reason for the length of the suspension -- believed to be the longest ever imposed by the Pentagon on any part of such a big weapons supplier -- has been the reluctance of Air Force lawyers to sign off before the scope of criminal probes became clear. In the July 24, 2003, memo imposing the suspension, Air Force Deputy General Counsel Steven Shaw said Boeing provided "false and misleading" information about Lockheed documents it possessed. The memo also criticized Boeing's internal investigation, noting that the company at the time refused to provide copies of its findings. But the criminal investigation into Boeing's illegal document gathering is largely wrapped up, according to government and industry officials. A number of former midlevel managers are expected to plead guilty as part of the corporate espionage, and the company is likely to pay hundreds of millions of dollars in penalties. Pentagon criminal investigators and prosecutors from the Los Angeles U.S. Attorney's office haven't uncovered any improper links between Boeing's rocket program and former Air Force official Darleen Druyun, who is serving a nine-month prison term for holding improper employment talks with Boeing while still overseeing its contracts at the Air Force. "We kicked those tires pretty hard," says a senior law-enforcement official. Likewise, last month's sentencing of former Boeing chief financial officer Michael Sears to four months in prison didn't implicate any additional Boeing officials or contracts. -- ----------------- R. A. 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