Boeing Co. has tentatively agreed to pay the U.S. government $615 million to settle two high-profile criminal investigations and related civil claims, the U.S. Justice Department said on Monday.
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,” said department spokeswoman Tasia Scolinos. The figure includes $50 million in criminal penalties and $565 million 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 programs.
A senior Justice Department official said the civil settlement to be paid by Boeing would likely to go to the U.S. 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, 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 program, with a strong focus on the hiring of former government officials and the handling of competitor data, she added.
Its stock fell 1.3 percent to close on Monday at $85.86 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.
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 program,” 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 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 aerial tanker lease deal with Boeing. She also acknowledged steering other contracts to Boeing for hiring her daughter, son-in-law, and ultimately her.