July 31, 2006

The Honorable Senator John Warner
Chairman
Armed Services Committee
U.S. Senate
225 Russell Building
Washington, D.C. 20510
(202) 224-2023
(202) 224-6295 FAX

Dear Mr. Chairman,

I am writing with information I think you will find essential in your preparations for your August 1st hearing of the Senate Armed Services Committee on the Boeing Company Global Settlement Agreement so you can adequately question both the Justice Department and Boeing representatives during the meeting in the most informed way possible.

I think it is important to know that the Justice Department settlement has not deterred Boeing in any way from continuing to defraud its government and private customers and the public even up to the present day. Boeing continues to be engaged in fraudulent activities of an even more serious nature than those the settlement covers--the Tanker and EELV contracting fraud matters--fraud that not only defrauds its government and private customers monetarily, but places our brave personnel in uniform and the public who fly on Boeing aircraft at much greater risk than they would be otherwise if it was not for this fraud.

In the last several years of my eighteen year career at Boeing, which just a couple months ago came to an end when Boeing retaliated against me for my whistleblower activities by terminating my employment, I tried to act as the conscience of the corporation I worked for that I knew had no conscience, even after Boeing’s well self-publicized "ethics reforms." In my spare time at work, in addition to the fraud I saw every day at my workplace as an inspector in the Propulsion Systems Division (PSD) of Boeing Commercial Airplanes (BCA) and at the Boeing Everett plant before that, I uncovered evidence of other fraudulent activities across the enterprise that placed in jeopardy more than the lives of personnel flying on Boeing commercial and military airplanes that was the result of the fraud I witnessed every day at my workplace—I uncovered evidence of illegal activities by Boeing that placed our very nation’s security in danger.

One of these crimes that I found evidence Boeing had committed was the transfer of some of the most sensitive information we have to our potential enemies. This information—the technical data and engineering procedures defining how to design composite structures of aircraft not detectable by radar—stealth aircraft—was developed by prime contractor Northrop during B-2 Bomber production for the Air Force, and required both Northrop and federal government approval before Boeing could use this data on anything other than the B-2 Bomber subcontracting work they were doing for Northrop.

Boeing engineers took this data with them after their work on the B-2, and did not control this most sensitive of data to national security in the manner it should have been controlled. Copies of the B-2 composite structural design allowables and methods were kept in Boeing personnel’s desks and in bookshelves that anyone, even non-citizens, could access and copy.

To make matters worse, Boeing used this "borrowed" Northrop B-2 program developed data ("borrowed," much like the EELV contract data, one subject of the Global Settlement Agreement, was "borrowed" by Boeing without Lockheed’s consent or knowledge) to use it on the 787 program, without Northrop’s and the federal government’s (who paid for its development) consent as required.

Seeing no evidence that Boeing intended to disclose this illegal activity to anyone outside the company, such as the federal government and Northrop, I anonymously disclosed it through my local newspaper, the Seattle Times, which ran three articles related to the subject:

The Seattle Times: Friday, September 2, 2005

U.S. holds up Boeing's plan to outsource work in China

By Dominic Gates
Seattle Times aerospace reporter

Boeing's plans to outsource parts for its new 787 jet to China have hit political turbulence as the Bush administration scrutinizes the deal.

Though Boeing already has approval to use airframe suppliers in Japan, Korea, France and Italy, it still needs a federal OK to share technology with a Chinese company tagged to build the 787 tail rudder. Boeing wants to use the supplier, based in Chengdu, to encourage airplane sales in China.

The issue of restricting technology exports will probably come up when Chinese President Hu Jintao travels to the U.S. to meet President Bush next week. He's expected to visit a Boeing factory when his U.S. tour begins in Seattle on Labor Day.

If Boeing fails to get an export license for Chengdu, it will have to build the 787 rudder elsewhere, perhaps in-house in its Frederickson plant in Pierce County or with a different supplier. As part of its scrutiny, the Commerce Department is examining Boeing's conduct in previous technology transfers to China.

But Boeing downplayed the delay and said it is working with Commerce to ensure that all export-license requirements are met.

"The U.S. government is being very careful about the licensing and wants to fully understand what we'd like to have China do on the rudder," said Walt Gillette, who is in charge of the 787 program. "We're having very thorough discussions with the government."

All economic and technology deals with China are now under intense scrutiny from the Bush administration.

"There is a debate going on within the administration and within Congress," said William Clements, a partner with law firm Foley & Lardner, who advises U.S. businesses on export control and who held senior regulatory positions on the issue in the Clinton administration. "There are those who see China as a threat and that taints their entire attitude toward normalized commerce with China. Others see China as a significant commercial opportunity."

The China hawks within the Beltway seem to have the upper hand lately.

Last month political opposition in Washington, D.C., killed a major bid by a state-controlled Chinese company, CNOOC, to buy the American oil company Unocal. That further strained already tense U.S. economic relations with China.

In June, Peter Lichtenbaum, acting undersecretary for Industry and Security in the

Commerce Department, testified before a congressional commission that China poses a problem because of concerns about modernization of its military and the risk of using U.S. technology to do so.

Boeing last year announced deals with Chinese suppliers worth more than $600 million, including one with Chengdu Aircraft Industry, part of a state-owned aerospace group, to supply the 787 rudder. Chinese airlines subsequently ordered 60 of the new jets, the largest aggregate order to date.

The 787 rudder, like the rest of the airframe, is to be made from advanced carbon-fiber composite plastic. This material, while commonly used in military airplanes and missile applications, is increasingly used in commercial jets. It also has many nonaerospace commercial applications, from bridge reinforcement to golf clubs.

In his June testimony, Lichtenbaum mentioned the Chengdu company and its potential to produce "composite-based parts, components, and sections (e.g., rudders) for commercial aircraft."

He said applications to license composite materials "will be denied if there is sufficient information to indicate the items could be diverted to military end-users or third countries."

Boeing's past behavior is also under inspection. The State Department has already prepared charges that the company violated export-control law in the 2003 foreign sales of 737s containing a gyroscopic chip classified as a defense item.

And internal company documents obtained by The Seattle Times show that the Commerce Department is looking into whether Boeing has already provided restricted technology to Chengdu — without an export license.

In addition, Commerce is examining whether Boeing has violated the terms of earlier export licenses for BHA Aero Composite Parts, a plant in Tianjin that opened in 2001, which is a joint venture with Hexcel and state-run China Aviation Industry.

BHA produces about 200 parts for Boeing, including the 737 trailing edge, interior panels for the 777, and the wing-to-body fairing panels and tail cone for the 737.

Commerce officials visited Boeing's composite-manufacturing center in Frederickson near Tacoma in July to assess the 787 rudder manufacturing plan and had plans to travel to Chengdu and other Chinese facilities last month.

A spokesman at Commerce said the agency is "statutorily prohibited" from commenting about its review process.

Boeing's strategy is to push ahead while withholding from Chengdu all technology requiring a license until it gets clearance.

Nelson Dong, a partner with law firm Dorsey & Whitney with expertise in export-control regulations, sees no reason for alarm in the Boeing license delay.

Advanced-technology-license applications to China routinely take longer to process than those for other countries, he said.

He said he read Lichtenbaum's remarks about Chengdu as a display of the requisite toughness from a public official appearing before a relatively hawkish and conservative commission.

In general, he thinks the Bush administration is walking a fairly balanced line on China.

And how sophisticated is the technology transfer in question?

Gillette said Chinese engineers won't learn anything they don't already know, if allowed to build the Boeing rudder.

"I've seen documents that show indigenous Chinese programs make some very complex composite structure, that they have figured out how to do on their own, that is much more complex than a rudder," he said.

Gillette said there is no need at this stage to line up an alternative supplier, as manufacture doesn't start for some time.

The rudder is a single, long piece that attaches on hinges to the vertical tail fin and helps steer the airplane. "We're not talking about a supercomputer here. It's a rudder," said Loren Thompson, a senior defense analyst with the Lexington Institute. "The rudder is not a particularly challenging aerostructure."

He said other countries will step in to supply such technology to China if this country doesn't. "Sometimes the U.S. government is its own worst enemy," Thompson said.

Flight International reported last month that Airbus is considering China as a supplier for the entire tail of its A350 — the rival jet to Boeing's 787. This would likely also be made from advanced composites.

The Seattle Times: Sunday, January 22, 2006

Separation anxiety: The wall between military and commercial technology

By Dominic Gates, Seattle Times aerospace reporter

Last April in Everett, in a tense meeting with an investigator sent by Boeing headquarters, a small group of 787 engineers dropped a bombshell.

The engineers, veterans of Boeing's work on the B-2 stealth bomber two decades ago, told investigator Rick Barreiro that technology and know-how developed for that secretive military program would be used in manufacturing the company's newest commercial jet.

The engineers refused to sign forms declaring that the 787 program is free of military data. One said he feared signing would leave him open to federal indictment.

Their assertions set off flashing red lights at Boeing. Federal law prohibits U.S. companies from letting militarily sensitive technical expertise go abroad.

Yet Boeing's entire global manufacturing plan for the 787 hinges on having foreign suppliers build large structures out of advanced composite materials.

The standoff with the engineers caught Boeing managers by surprise. "We all underestimated the amount of screening we needed to do" for military technology, said Walt Gillette, head engineer and vice president for airplane development on the 787.

In the months that followed, outside lawyers pored over 1970s-era documents in search of proof that some key manufacturing techniques originated in the commercial business, not in military programs.

And to satisfy the letter of the law, Boeing workers have embarked on some surreal tasks.

One example: Boeing's B-2 work showed that the plasticized carbon-fiber tape used to make composites can be safely frozen and stored for up to a year — twice as long as previously thought.

That fact is now well-known in the composites industry, yet 787 engineers can't inherit that knowledge from the B-2 program, Gillette said. So they conducted fresh tests to prove a result they already knew.

"It is our clear intent to make sure we comply with the law," Gillette said. The underlying issue is whether Boeing's plan to outsource high-tech 787 composites manufacturing could put U.S. government technology in the hands of either enemies or potential future economic competitors.

Yet Boeing's internal response to Barreiro's findings suggests a reverse perspective: that the laws designed to protect military secrets create barriers to legitimate sharing of commercial technologies, which executives see as essential in the globalized aviation marketplace.

Gillette portrayed the issue as a regulatory headache rather than a genuine threat to Boeing's 787 plan. And he insisted that the questions raised by Barreiro and the engineers are being resolved.

Furor in Everett

Boeing can't take the technology-export issue lightly because it previously ran afoul of the restrictions.

Internal documents show the Department of Commerce found export-license irregularities during the 1990s in Boeing's sharing of composites technology with its Japanese partners on the 777, which has a tail made from composites.

Commerce closed that previously undisclosed investigation last year and issued a warning letter to Boeing. Neither the company nor the Commerce Department would discuss details.

And last summer, the State Department prepared civil charges against Boeing alleging 94 violations of the Arms Control Act because the company sold commercial jets without obtaining an export license for a tiny gyrochip that has defense applications.

Boeing regards that case as an overzealous application of export-control laws, but the issue hasn't been resolved.

Senior vice president and general counsel Douglas Bain told a private meeting of top Boeing executives in Orlando, Fla., earlier this month that the State Department is taking a hard line on the gyrochip case and that "it's probably their intention to hammer us."

On the new 787 program, Boeing is taking composites technology much further than it did on the 777. The whole 787 airframe, like that of the B-2, will be made from plasticized carbon-fiber composites rather than the conventional aluminum.

Boeing developed new manufacturing methods, molding enormous single-piece fuselage barrels out of composite plastic. When production starts, those fuselage sections will be made in Italy and Japan.

To ensure it didn't cross the line on potential military input, Boeing's Office of Internal Governance sent in Barreiro to lead a so-called "Red Team" review.

The story of his investigation and its aftermath was revealed in company documents obtained by The Seattle Times. Barreiro declined to comment. Some detail was confirmed by engineers who were involved.

The uproar over Barreiro's findings stemmed from how he reclassified some of the manufacturing processes.

Technology with both commercial and military applications — so-called dual-use items — is generally exportable with a Department of Commerce license.

But after hearing from the engineers, Barreiro retagged a list of 787 technical specifications as defense items, not dual-use items, meaning they are subject to stricter State Department jurisdiction under the International Traffic in Arms Regulations (ITAR) law.

Bottom line: The 787 must be "ITAR-free." With even a single ITAR item on a commercial airplane, it cannot be sold overseas.

Barreiro's ITAR classification prompted a furor. Local 787 export-control manager Vanessa Gemmell angrily confronted Barreiro, then stormed out to complain to his boss.

Next day, Barreiro threatened to quit. He stayed only after Boeing legal staffers upheld his concerns.

Gillette, in a later interview, minimized the internal clashes.

He said some engineers had initially balked at signing a form declaring the 787 free of military know-how only because it was poorly worded. Once the wording was changed to attest only to what they personally knew, the engineers were ready to sign.

The outside review by Barreiro's "Red Team" delivered a helpful jolt, Gillette said, since "our knowledge of the depths of the law was still coming up to speed."

Boeing must identify every "little piece of data that came from a military source," Gillette said. "We have to find it, and we have to remove it and replace it with a commercial source of the data."

A Boeing spokeswoman said the meticulous process now under way has reduced the number of potential ITAR items on the program from 20 in July to "only a few" now.

Cutting edge or not?

In a plant across from the Flight Museum, Boeing has worked for more than a year with its Japanese and Italian partners to perfect the pioneering robotic production of 787 wings and large, single-piece fuselage barrels.

Gillette described the 787 airframe as a "black aluminum" design — meaning its structure is identical to earlier aluminum airplanes, except made with composite plastics, which are black.

In other words, not so revolutionary. Boeing isn't the only one with those skills, he said. "All of our big airframe partners, they all make various kinds of primary composite structure already."

Gillette also said commercial-aerospace research on composites predated the military uses.

He produced copies of NASA documents outlining 1970s research programs conducted by Boeing, Lockheed Martin and McDonnell Douglas that culminated in the first use of composites on primary aircraft structures in civil jets.

Under the legislation that guides NASA, he said, the results of that work were "put into the public domain for all to use," generally within a year of completion.

Though secret research on the stealth bomber had already begun in the late 1970s, it was publicly launched only in 1981. Gillette said five special-issue Boeing 737s with carbon-fiber tails entered scheduled service in 1982, a year later.

Likewise Airbus was manufacturing A310 passenger jets with carbon-fiber vertical fins by 1985, three years before the first B-2 was publicly displayed.

If some engineers think B-2 technology has migrated to the 787, he suggested, they may simply be unaware of such earlier commercial applications.

Regardless of how the technology was developed, Loren Thompson, a defense analyst with the Lexington Institute, agreed with Gillette that the 20-year-old material design of the B-2 is no longer state-of-the-art. He dismissed the idea that any composites technology on the 787 could still be militarily sensitive.

"Knowing how to work with composites, by itself, would not greatly aid an enemy," Thompson said.

He sees the export laws as outdated, reflecting a control system designed for the Cold War rather than the new reality of economic globalization.

"At some point people need to lift their eyes from their military concerns and look around at how the global market has changed," Thompson said.

Nevertheless, Boeing must satisfy the government.

In late October, Commercial Airplanes Chief Executive Alan Mulally sent employees a memo on the importance of complying with the laws controlling export of technical data.

On a visit to Seattle this month, David McCormick, undersecretary of Commerce responsible for export control, said his department is in constant dialogue with Boeing on the subject. After a period of intense scrutiny and delay, Commerce in November granted a license that will allow manufacture of the 787 rudder in Chengdu, China.

"There is a national-security issue around composites," McCormick said, specifically citing China. "That's certainly something Boeing has tried to be sensitive to."

According to a Boeing insider, at the company's private annual leadership retreat in Orlando on Jan. 5, top lawyer Bain said that the 787 program has more than 100 people dealing with export-control matters.

He described export-license problems throughout the company as "the biggest issue we face."

The Seattle Times Business & Technology: Sunday, January 22, 2006

How B-2 data wound up in 787 program

By Times aerospace Reporter Dominic Gates

Boeing investigator Rick Barreiro learned last spring that some 787 engineers kept old B-2 bomber technical manuals in their cubicles for reference purposes.

In some cases, one engineer told him, data from those manuals had simply been copied straight into 787 technical specifications.

In an interview, Walt Gillette, head engineer and vice president for airplane development on the 787, discussed one instance of how such forbidden military data leaked into his program, and what he's done about it.

Last March, a lead engineer working on the procedure for fastening the 787 wings to the fuselage e-mailed colleagues with B-2 experience.

He wanted to know if they recalled the specifications used on the military plane for aligning and drilling holes in multiple layers of titanium and composite materials.

A Boeing engineer now working in Seattle on the F/A-22 fighter jet program quickly supplied the answer — specific numerical guidance for the drilling machine — from a B-2 manual dated 1991.

Using such borrowed knowledge is not allowed under federal International Traffic in Arms Regulations (ITAR) laws, as supervisors later made clear to the 787 engineer.

"He couldn't use it on this airplane," Gillette said.

But there was a simple solution. To remedy the breach, Gillette said, Boeing's 787 engineers performed new tests and developed a fresh set of guidance data to replace the legally tainted B-2 data.

Presto — that was enough to classify the procedure as commercial, not military.

End of the articles.

The reporter’s questions to governmental agencies such as the State Department "raised some eyebrows" about the "migration" of B-2 Stealth Bomber design data to commercial use at Boeing. As late as mid-May, I found evidence that the matter was under investigation by the federal government—by the Defense Criminal Investigative Service (DCIS) of the DOD, as I remember. The DCIS may well be still investigating this uncontrolled migration of ITAR controlled military data to the Commercial Airplanes unit of Boeing where any of Boeing’s partners could have conceivably accessed and copied it as it was not access-controlled as required, including Chinese nationals.

If things go bad some day over Taiwan, or because of some other matter between the U.S. and China, would you want China to attack us with stealth aircraft made possible by Boeing’s uncontrolled migration of this data from the military side of Boeing to the non-ITAR controlled Commercial Airplanes "white world" side of Boeing where Boeing routinely transfers data to its Chinese partners? I think not. And that is why I acted as I did to ensure some light was shed on this potential threat to national security posed by Boeing’s theft of DOD and Northrop data to use on 787 and other programs. What is not discussed fully in the articles is how the noted B-2 data was used in the aft fuselage section of the 777, which is built from structural composite in Japan. While Boeing duplicated some tests they already knew the results of to try and make the stolen DOD and Northrop B-2 data they based those tests on "theirs" (which I strongly doubt is legal, especially since Northrop and the DOD never allowed Boeing to use the "cheat sheet" of stolen B-2 composite design structural allowables at all outside the B-2 program), I know of no evidence they did so when using that same B-2 data on the 777 and other commercial airplane programs. Which Boeing partners on those earlier tainted commercial airplane programs, such as China, got access to the B-2 Stealth Bomber data, and how much of that data they obtained, may not be a subject of the DCIS investigation, as the articles did not cover all aspects of Boeing’s theft/misuse of this sensitive military data. A questioning of the Boeing representatives before your committee on the subject, and a request to the relevant committee/government agency to look into this matter of national security interest is a course of action you may wish to take, at a minimum, to ensure that the effort to bring Boeing to justice on this issue that I began is ultimately finished, and finished as it should be, under your thorough oversight to ensure national security is maintained, and those responsible for its breach are brought to justice.

I don’t believe that, even to this day, that Northrop (and perhaps even the DOD, minus the investigation) has been informed by Boeing that its proprietary data was used as a template for Boeing’s commercial airplane structural composite designs, and I consequently believe that no compensation due Northrop and/or the DOD for use of the federal government financed data was paid. Please ask Boeing’s representative at the hearing whether this is the case.

For if so (and I’ve seen no data to show otherwise) this is just another example of Boeing stealing other company’s (and in this case, the federal government’s, also) proprietary data to gain advantages in the marketplace it otherwise would not have without such criminal activity. In this case, it saved millions if not billions of dollars by stealing this military R&D data for use in its commercial airplanes rather than financing development of its own composite aircraft structural technology, paying Northrop and/or the federal government the required royalties, and getting the required export licenses that going through the legal channels of obtaining the military data from Northrop and the DOD for commercial use would require.

The Department of Justice was likely not aware of the above theft of vastly more sensitive data affecting national security than that that was stolen during the EELV affair that is the subject of the Boeing Company Global Settlement Agreement they negotiated. For, if they had been aware of it, the Global Settlement Agreement may not have even taken place, and the Justice Department probably would have pressed charges if they had followed the Thompson Memo guidelines, and/or used simple logic in the direction they took with Boeing, who, with this data in their hands, would be viewed rightly as a company habitually doing illegal acts to maximize their bottom line--And not just illegal acts that attempted to financially defraud the federal government and Boeing’s competitor companies like the comparatively minor EELV and Tanker misdeeds—but illegal acts that both financially defrauded the federal government and Boeing’s competitor companies and placed national security in danger. Please ask representatives before your committee if they were aware of these illegal activities by Boeing, and, if not, how that would have changed the light "punishment" favoring Boeing’s interests that is the Global Settlement Agreement into something perhaps much more fittingly harsh to alter Boeing from committing these illegal acts even up to the present day, even after the Global Settlement Agreement.

Prior to the above, and during my efforts to collect data to bring Boeing to justice regarding the fraud I witnessed every day in my job at Boeing, I also came across information showing yet additional blatant disregard for national security by Boeing when the companies bottom line could be enhanced by ignoring national security concerns. This issue was under investigation at the time by the State Department, and a Washington, D.C. newspaper had done an article that gained little attention (and therefore generated little, if any, public scrutiny on the subject that would ensure the State Department acted in the public interest on the matter) on the subject by an apparent leak of information from the State Department itself. By that time I had had extreme difficulties working without public scrutiny in getting the federal agency (that was supposedly the agency to contact to get the corruption I saw at Boeing every day ended) to act to stop the illegalities or even acknowledge its obvious existence and pervasiveness throughout BCA. I knew by then that the only way to ensure a government agency acted impartially and in an unbiased way against a company as large and powerful as Boeing was to ensure public scrutiny on the government agencies actions in the matter to "keep them honest" and ensure an outcome favorable for the public and nation the agency was set up to protect.

The data I had showed willful disregard for export laws that protected national security in the name of pure greed by Boeing that any patriotic American citizen such as me would and should be enraged by. Again, to ensure national security was protected by bringing Boeing to justice in this matter, I disclosed this evidence of Boeing’s willful disregard for export laws when a few more bottom line dollars could be made to my local newspaper, who wrote an article in much more detail than the Washington D.C. newspaper article. The article gained national attention, and, I strongly believe, ensured the State Department would act in the public interest in this national security matter:

The Seattle Times: Wednesday, July 6, 2005 State Department goes after Boeing

By Dominic Gates
Seattle Times aerospace reporter

The State Department has prepared civil charges against Boeing alleging 94 violations of the Arms Control Act because the company sold commercial airliners without obtaining an export license for a tiny gyrochip that has defense applications.

The company faces a potential fine of as much as $47 million, and the case could be another blow to the company's fragile relations with the federal government.

In pursuing Boeing over exports of 96 jets to China and other countries between 2000 and 2003, the government is resurrecting a thorny and highly politicized issue: How should the U.S. protect dual-use technology that has both military and commercial applications without damaging its increasingly globalized trade?

To Boeing, the case is fallout from an overzealous application of export controls that threatened to derail overseas sales by treating commercial airplanes on a par with fighter jets. In September 2003, two 737 jets went to China only after President Bush personally signed off on the deliveries.

Yet early last year, the federal government conceded Boeing's right to export the technology as a civilian item rather than a military one.

Though the central national-security issue ultimately was decided in Boeing's favor, the State Department alleges that between 2000 and 2003 the company showed "a blatant disregard for the authority of the Department," misrepresenting facts and making false statements on shipping documents to get around the export restrictions.

Boeing claims it ignored State Department edicts because its lawyers advised that the department was "without legal authority" to regulate the exports.

That open defiance of the State Department is the crux of the current case.

In a meeting with Boeing lawyers last month, State Department officials made clear that they will seek a substantial fine, according to an account of the meeting.

A draft charging letter obtained by The Seattle Times asserts the government could impose potential fines of up to half a million dollars per charge, plus a potential but unlikely three-year suspension from government contracts.

Similar cases against Loral and Hughes Electronics, as well as a previous case involving Boeing's sea-launch rocket program, were settled with multimillion-dollar fines, but no suspensions.

No permanent solution

Perhaps worse for Boeing, the resolution to the export question last year did not comprehensively solve the broad underlying problem — so that the issue of dual-use technology could arise again to threaten the company's ability to sell airplanes.

The State Department charges against Boeing relate to the export of jets that contain a gyroscopic microchip called QRS-11, used as a backup system in determining a plane's orientation in the air.

Though a Boeing document refers to the chip as "relatively unsophisticated" technology, the gyrochip also has been used to help stabilize and steer guided missiles.

In the draft charging letter, the State Department's Directorate of Defense Trade Controls alleges that between 2000 and 2003 Boeing broke export control laws in shipping to China and other countries what was then classified as militarily significant technology.

Further, it claims the company did so deliberately and repeatedly even after it had been warned to stop.

"False statements"

Boeing "was aware that a [State] Department export license was required but chose to export without authorization by using false statements on documents," the charging letter alleges.

Boeing managers declared on shipping certificates that no export license was required, even after the State Department had told the company otherwise, according to the letter.

Boeing eventually acknowledged to the State Department it had exported 96 aircraft and 27 spare gyrochip-equipped flight boxes without export licenses.

The QRS-11 chip, made by a unit of BEI Technologies in Concord, Calif., is just over 1-½ inches in diameter and weighs about 2 ounces. It sells for between $1,000 and $2,000.

Described as "a gyro on a chip," it is used to help control the flight of missiles and aircraft.

On Boeing jets, three BEI microchips are embedded in an instrument box made by French avionics firm Thales.

Acting together, the three chips provide a three-dimensional positional reading, telling the pilot through the flight display the precise yaw, roll and pitch of the airplane.

This no-moving-parts electronic-sensor system acts as a back-up to a spinning gyroscope.

Because of its use in guided missiles, the sensor is classified as a significant military item. Export-control regulations dictate that any larger system containing the sensor — even a commercial airplane — also must be considered a military item.

China sanctions

Such systems require a license every time they are moved to another country. In addition, in China's case, sanctions introduced after the bloody 1989 Tiananmen Square crackdown mean that export of military items requires a specific presidential waiver from the White House.

Boeing had used the QRS-11 sensors in its jets since 2000. The supplier, Thales, told Boeing in 2000 that an export license was needed, according to the charging letter.

Boeing told the State Department later that its engineers "failed to appreciate the potential significance" of that early notice.

But when the State Department became aware of the issue in 2003, it insisted upon the need for export licenses, presenting an enormous barrier to Boeing commercial sales.

"If you have to file for an export license every single time an airplane takes off and lands from China, that's a completely unrealistic and nightmarish scenario," said Pierre Chao, a senior defense analyst with the Center for Strategic and International Studies.

Was there a genuine threat to U.S. national security if these sensors inside the electronics bay of 737s were sold to China?

"You can't dismiss it out of hand," said Chao. "However, the notion that someone is going to buy a $30 million airplane in order to strip out a chip and equip an entire missile fleet does stretch the imagination."

Further, by 2003, the QRS-11 chips were on Boeing, Airbus and business jets dispersed around the globe. The government was attempting to bolt the door after the planes had flown.

"There was a common-sense element that didn't quite compute," Chao said.

Both Boeing's defense and the government's case zero in on a letter to the State Department dated August 2003, in which the company said it had re-reviewed the classification of the sensor and decided that the department "did not have jurisdiction."

That's why, Boeing argued in a formal defense last year, the company still didn't follow instructions to cease the airplane deliveries even after becoming fully aware of State Department objections.

"Good faith" exports

The exports were "made in good faith based upon a well-founded legal opinion," the written defense states.

The standoff over the gyrochip reached crisis point in September 2003, when executives from China Southern Airlines arrived in Seattle to take delivery of two 737s, and the State Department informed Boeing that a presidential waiver would be needed.

Boeing's then-Chief Executive Phil Condit ordered his Washington, D.C., lobbying staff to pull out all the stops. President Bush issued a verbal waiver Sept. 20, the scheduled day of delivery.

U.S. Rep. Henry Hyde, R-Ill., chairman of the House Committee on International Relations, and ranking Democrat U.S. Rep. Tom Lantos, D-Calif., lodged a strong letter of protest at the hastily processed exemption.

In November, top Boeing and U.S. aviation-industry leaders petitioned then-Secretary of State Colin Powell for a resolution, as did Airbus executives.

In January 2004, a political fudge emerged: QRS-11 sensors were kept on the list of military items; but when integrated into commercial-jet flight boxes, they were reclassified as commercial, not military, items.

Export control of sensors inside commercial jets was transferred from the State Department to the Department of Commerce.

In a January 2005 interview in Beijing, David Wang, president of Boeing China, talked about the problems caused by the QRS 11 chip, which he described as "a little bitty thing."

Wang's remarks seem to reflect Boeing's view that the regulation is nothing but an impediment to sales.

"[The gyrochip] is a low-value card that they could find other ways to buy," he said. "If they want to buy a 737 to pull that part out, I'd love them to buy more 737s."

Fast White House response

"We had to work a lot with [the U.S. government] bureaucracy to say, 'Guys, this is not a problem,' " he added. "I have to say the [Bush] administration responded extremely quickly, so the first delivery that was affected was only affected a couple days. But then we kept having to go back and resolve the next delivery ... it dragged on for a number of months. It wasn't just China. It was everywhere."

Wang must have been relieved by the 2004 reclassification of gyrochip-equipped flight boxes.

But if Boeing thought it was completely off the hook, it was mistaken. Boeing's 2003 refusal to accept State Department authority is coming back to bite it.

Both a State Department official involved in the case and a department spokesman declined comment for this story.

A prepared statement from Boeing emphasized that the charges relate only to activity prior to 2004 and said the company continues "to work with the State Department towards possible resolution of this matter."

Meanwhile, the underlying issue hasn't gone away.

"[The QRS-11 issue] ended up being a one-off crisis," said Chao. "It did not trigger any kind of broader reform. We are still living with the central issue: Can you control technologies? How do you control them? ... All these issues raised in the heat of the moment remain unresolved."

Affordable technology

The military adopted the QRS-11 gyrochip, originally conceived of as a commercial product, for use in a missile system primarily because the technology was so affordable.

Such cross-pollination between the military and commercial sectors is only likely to increase as defense-procurement officials seek to curtail spiraling costs. Yet government oversight of technology transfer is ill-equipped to deal with the issues that will arise.

"We still have an export-control system that is constructed for a different era," said Chao.

End of article.

The outcome of the State Department’s investigation is outlined in the following article:

Boeing pays $15 million fine

By Dominic Gates
Seattle Times aerospace reporter

Boeing has paid the largest fine ever levied on a company for violation of the Arms Export Control Act, settling a dispute with the State Department over the unlicensed foreign sales of commercial airplanes carrying a small gyrochip with military applications.

In addition to a $15 million fine, a consent decree signed March 28 imposes oversight requirements on Boeing because three previous settlements of similar alleged violations didn't result in full compliance with export controls.

Still, Boeing may consider itself lucky. The maximum fine was $43 million.

And because Boeing "has acknowledged the seriousness of the violations ... expresses regret for these activities and its willingness to make amends," the State Department decided that the ultimate sanction of "debarment," or banned from government contracts, "is not appropriate."

In a January speech at a private retreat in Orlando, Fla., for top Boeing executives, senior vice president and general counsel Douglas Bain described export control as the "biggest issue we face" and listed the QRS-11 charges among the company's unresolved legal problems.

According to the State Department charges, between 2000 and 2003 Boeing shipped overseas 94 commercial jets with the QRS-11 gyrochip embedded in the flight boxes, including 19 to China. Export of listed defense items to China is specifically proscribed.

The State Department had determined in 1993 that the chip, used in the guidance system of the Maverick missile, "has significant military utility." That put the devices on a list of products that require a license for foreign sales.

Boeing continued the exports even after the State Department told the company to stop.

Boeing ignored those orders after its lawyers advised that the State Department "did not have jurisdiction" to regulate the exports.

"In hindsight, we should have handled it differently," said Boeing spokesman Tim Neale.

"We would handle it differently today."

The settlement includes an acknowledgment by Boeing that the State Department has authority to decide which technologies are designated as defense items under export control.

The 2-ounce, 1-inch-diameter QRS-11 chip, made by a unit of BEI Technologies in Concord, Calif., sells for less than $2,000. Boeing executives argued that a military enemy seeking the chip would have alternatives to buying a $60 million jet and taking apart the flight box.

Reaches a head

The dispute between Boeing and the State Department reached a head in the fall of 2003, when two 737 jets were released to China only after President Bush signed a last-minute waiver after a request from then-Chief Executive Phil Condit.

That produced a political settlement the following January in line with Boeing's view of the issue: QRS-11 chips remained on the list of military items but were reclassified as commercial items when integrated into commercial-jet flight boxes.

After that, export of the chips inside Boeing commercial jets was no longer an issue. The case remained alive because of Boeing's previous "blatant disregard" of the State

Department. In addition to unauthorized export, State charged Boeing with misrepresentation of facts and false statements.

Other incidents

Boeing has violated arms-export-control rules on three previous occasions.

• In 1998, Boeing was fined $10 million because it shared sensitive technologies without an export license with its Russian, Ukrainian, Norwegian and German partners in the Sea Launch space rocket joint venture.

• In 2001, Boeing was fined $4.3 million for technology transfer without an export license to Australia, Malaysia, Turkey and Singapore on its Wedgetail 737 Airborne Early Warning and Control aircraft program.

• In 2003, Loral and Hughes Space and Communication were fined $32 million for illegal export of satellite technology to China. By then that Hughes division had been acquired by Boeing, though the violations happened before the acquisition.

In the March consent decree, the State Department points out that more than $9 million of those previous fines were returned to Boeing to fund remedial compliance measures that would avoid future violations.

Because that didn't work, the new settlement requires Boeing to appoint an independent external officer to oversee companywide export-control compliance for two years, as well as a senior manager internally. And it must retain an outside firm to audit implementation.

The company informed employees of the settlement Friday.

End of article.

As can be seen by these events, Boeing still places maximizing profitability over any and all other concerns, no matter how threatening to the continuance of "plane fulls" of lives or contributing to the danger to any number of lives —even concerns threatening the very security and therefore existence of the nation in which it is incorporated, and in which we live.

As can be seen in the above case, Boeing chooses to follow whichever opinion (in this case, the obviously flawed opinion of internal lawyers—and chief counsel Doug Bain) helps it attain its profitability goals, irrespective of how obvious the meaning of the law or authority of the relevant government agency it is ignoring is.

In this case, as is always the case at a solely schedule (when meeting that schedule helps profitability goals) and bottom line driven company, Boeing had to find some reason—no matter how obviously false—to use to violate the direction of the State Department—our own government-- and meet its schedule and bottom line goals—in this particular instance, delivering the airplanes containing the QRS-11 chip to proscribed countries within the delivery month to avoid late delivery penalties, reduce inventory holding costs, and get the large final payment for the airplane at delivery that was critical (to Boeing) for the quarter’s and year’s bottom line.

As for the statements by people in the story that China would not buy a Boeing plane and remove the QRS-11 chip for the use of its military, that is obviously false. China could remove and "reverse engineer" the chip for military use and put it back in the plane, or, if damaged during the "reverse engineering," simply get it replaced with a spare unit from Boeing. Of course China would not buy the plane just to get such access to the chip—it could have access to the technology and still fly the plane commercially—in effect getting a "bonus" of small solid state gyro chip technology for missiles for the Chinese military by buying the plane.

Which brings us to "my story--the similar crimes/corruption at Boeing I saw every day at my job that endangered our brave troops’ lives as well as the lives of the public, which Boeing also committed (and continues to commit even up to the present day) to meet schedule, efficiency, and profitability goals by intentionally violating the very laws and regulations that enable it to manufacture airplanes (and that ensure those airplanes meet all quality, safety, and reliability requirements before delivery).

Compared to the above massive violation of export control laws that protect the security of our nation, the continuing theft by Boeing of other company’s (and the federal government’s) proprietary data to gain market advantage and maximize the bottom line, and the other relatively minor violations of law by Boeing that are the subject of the Global Settlement Agreement, the violations of law and regulations by Boeing that led me, via my research efforts to document it and bring it to an end, to find and report the details of the criminal activity noted above, should not surprise you at all.

In my job as a quality assurance inspector at Boeing, I saw every day the "rollerstamping" (or "hot stamping" as it is more widely known outside of Boeing) quality system that Boeing management had put in place at Boeing to maximize, again, schedule, efficiency, and bottom line performance at the expense of the regulation required adherence to the FAA-approved quality system procedures of inspection that were in place to ensure the quality, safety, and reliability of the airplanes Boeing built for both commercial passenger and freighter use, but also as platforms for military aircraft.

Not even minimal levels of adherence to these critical quality system procedures whose use ensures minimal levels of quality, safety, and reliability of Boeing aircraft were being maintained on Boeing production lines. Boeing management—especially quality assurance management, who should have cared the most, as it was their supposed jobs to do so-- never seemed to care about the quality or safety procedures being followed. In fact they treated the quality assurance processes—at Boeing, mainly the inspection of parts, assemblies, installations, and tests to be per Engineering drawings, specifications, and manufacturing plans—as completely optional as compared to the "imperatives" of cost, schedule, and profitability goals.

I noticed this at the Boeing’s Everett plant, when I became an inspector after almost five years as a mechanic on the B-2 program, and about the same amount of time as a mechanic at the Everett plant, mainly on the 777 program. While rollerstamping by inspectors was the norm there ("rollerstamping" means an inspection "bought off" with a stamp on the paperwork "certifying" it was done, without doing the required inspection, or just doing a partial inspection). At Boeing, all parts, assemblies, and installations are supposed to be inspected by qualified inspectors on every airplane per Engineering drawing, specifications, and the manufacturing plan requirements to ensure the airplane conforms to the Engineering Type Design and is in a safe condition for operation. Although inspectors buying off operations and manufacturing plans stating inspections were done without any sort of inspection did and does happen, the most common form of rollerstamping is where an inspector partially does a "shakedown" type inspection of the aircraft component rather than the required detailed inspection to ensure the detail, assembly, or installation is per drawing, spec, and plan requirements.

A shakedown inspection is a non-drawing and manufacturing plan inspection where an inspector is supposed to look for obvious discrepancies that might have been missed per the more detailed inspections per the drawings, specs, and plans, as well as foreign objects, damage, etc. So, when a rollerstamping inspector substitutes this very cursory and high level inspection for the required detailed inspection that should be done per the drawing, spec, and plan, they are rollerstamping those plans off stating they did the "per drawing, spec, and plan" inspection, even though they didn’t. What makes it even worse is that the rollerstamping inspector does not read the plan also, so the component or area that is covered by the job may not be the area covered by the plan, and which the rollerstamping inspector is buying off stating they performed the detailed inspection required. With the careless "inspections" that are done by rollerstamping inspectors (the vast majority of inspectors at Boeing), also come other careless habits that come when management condones rollerstamping, such as is the case at Boeing—non-use of flashlights and/or mirrors—where the inspector just walks up to the airplane and "eyeballs" (literally) what they think the job entails, leaving the back half of the installation truly uninspected, along with the areas not lit well enough to see without a flashlight.

The end result is details, assemblies, installations, and therefore entire airplanes that were never inspected as required per the FAA approved quality system and contractual requirements that ensure the quality, safety, reliability, and configuration requirements have been met. And so, Boeing delivers these airplanes to both private and government customers without these most basic and essential requirements being ensured. And due to the massive level of rollerstamping going on by inspectors with approval of Boeing management of the highest level, every airplane delivered does not meet those essential requirements. Which requirements are not met and which defects exist on each airplane because of this fraud? In most cases it is impossible to know until the nonconformance "rears its head" by creating a problem noticed by someone, or if not noticed, causing an accident.

Despite the massive level of rollerstamping going on around me in the Boeing quality system, I still tried to perform inspections as they should be done—actually doing them, and doing them per drawing, spec, and plan. This caused me no end of problems personally. The surest way to get the negative attention of a quality assurance manager at Boeing was to actually do inspections instead of rollerstamping them. I, and the few inspectors like me that did not rollerstamp sufficiently, were transferred out of areas by corrupt Boeing QA managers who didn’t want the "problems" (such as defects found and corrected on the aircraft by such inspectors that slowed production down, as opposed to the smooth and predictable flow of production rollerstamping inspectors who rarely or never found the defects on the aircraft ensured) inspectors who actually attempted to do their jobs per the FAA-approved quality system caused in the almost wholly corrupt Boeing quality system.

I got a requested transfer to BCA’s Propulsion Systems Division (PSD) from Everett, which was much closer to my home, because corrupt Everett QA management did not want inspectors like me that actually inspected the airplanes properly.

At PSD, the same rollerstamping quality system was in place, and inspectors actually inspecting were the exception, and not the required rule. I was retaliated against and harassed for just trying to minimally do my job by shop mechanics, shop management, and my own QA management.

When I told an fellow (rollerstamping) inspector that I was not going to overlook my QA manager’s direction to allow shop configuration changes to the airplane contrary the drawing configuration, I was shortly transferred to a "make work" office job away from the production line. This was approved by (name), my Director of Quality at the time who is currently Director of Quality for the whole 787 program. (Name) used to come into the office where I was being kept from the production line and ask me, "are they keeping you busy." Even after his promotion when he was head of Quality for the former Sonic Cruiser, he asked me the same question at a "PSD family day" event when I and my kids were viewing the Sonic Cruiser model he was showing off.

Even though I knew at some level the massive level of corruption of the Boeing quality system from the time even prior to my becoming an inspector, an event on 1/11/02 made me finally pay attention to its seriousness, and I have been trying to end it since that date with little success.

That day, my corrupt Boeing QA supervisor of the time put me in a conference room and told me straight up "the birds and the bees" of the corrupt Boeing quality system, which prior similarly corrupt Boeing QA supervisors had carefully kept "close to the vest" because they knew it was illegal.

He told me that we only inspected the airplane when the production schedule allowed us time to do it, otherwise, we "altered our processes to meet the production schedule," or, to put it shortly, we rollerstamped. He said we didn’t need to use drawings to inspect and didn’t need to inspect what any impartial observer would know were critical parts of the airplane, such as the electrical wire bundle that communicated control and sensor signals to and from the engine, which were installed at PSD. He said the engine would remain running even if the wire bundle was missing, so we didn’t need to inspect it at all, much less inspect it per drawing. Doing a bit of acting to elicit more information from my QA supervisor, I said had always thought that we were supposed to inspect per the drawing, spec, and plan, and I knew then, after hearing what he had to say, that I must have been wrong. The corrupt QA supervisor nodded in agreement. This meeting occurred before a weekend I was supposed to work, and my corrupt QA supervisor kept emphasizing that "we needed to ship the engines (that were being worked that weekend) on schedule," just as you’d expect a Boeing manufacturing supervisor that cares nothing about quality to talk. Indeed, in my experience, there is no difference between Boeing manufacturing supervisors and the corrupt QA supervisors that are supposed to independently ensure Manufacturing performs their work to quality, safety, and reliability requirements.

After that meeting, I was thence on fully informed about the way the corrupt QA system worked (or, more accurately, did not work) at Boeing. I knew lives were in danger because of it, and I knew I had to do something about it, regardless of the risk to my further employment at Boeing. I took virtually all of my remaining sick leave and vacation in order to write a report to the FAA so they could stop this corruption before it inevitably cost lives-—corruption I assumed the FAA did not know about despite their "oversight" responsibilities of Boeing’s Quality System.

I turned my report into the local MIDO office of the FAA that oversaw Boeing on or about 1/28/02 and told the manager and his assistant I met with there that it documented the massive level of rollerstamping that was going on throughout BCA. They said they would look into it. I asked them to keep me informed.

I got no further information from them, but an Aviation Safety Inspector (ASI) from the MIDO did visit PSD, as I overheard my boss and his peer talking about. My boss figured that it was me that had reported Boeing to the FAA, so I was almost immediately transferred to another plant, Boeing Flight Test in Seattle as retaliation. All the while I thought the FAA was investigating and was going to bring to an end the massive corruption I had documented in the first report I had given them, I was working on an addendum to my first report that included many more details and other instances of wrongdoing allowed by corrupt Boeing QA management. In May, 2002, I contacted the MIDO to arrange a meeting to give them the "remainder of" my report. That is when they informed me that they had sent one ASI to my workplace who only looked at certain items from my report that they thought would not give away my identity if they investigated them, who had found nothing. They had not told me of the results of that "investigation" because they said I had not requested such a report, even though I had.

Then I knew that the stories I had seen in the press about the FAA’s deference to letting the aircraft industry ignore procedures meant to ensure safety unless a sufficient body count in accidents was reached were more factual than not. Seeing this corruption at the MIDO that ignored obvious evidence of Boeing QA management corruption and therefore facilitated it, I knew I needed help. I asked the MIDO to investigate the addendum to my report as it had many new items in it, while I wrote to FAA headquarters and my Senators asking for help to ensure my report was indeed investigated properly this time. This seemed to motivate the MIDO more than originally, but in August, 2002, I received a letter from Nicholas Sabatini, FAA Associate Administrator for Aviation Safety, detailing the few findings that came from the investigations of only the symptoms of QA management corruption at Boeing. The corrupt personnel in Boeing management who I detailed the illegal actions of never were investigated themselves, along with the most of the results of that corruption documented in my report—hundreds of noncomplainces bred by that corruption that were documented in such detail that only the filling out of the finding form should have been necessary by the FAA.

Since my efforts thusfar had only resulted in sham investigations by the FAA that did not result in the reforms that were desperately needed in Boeing’s quality system before lives were lost, I decided to contact Boeing Senior Management at Boeing Headquarters, who I assumed knew nothing of the corruption in Boeing QA management, and would act to stop it once they knew about it.

I contacted Doug Bain, Boeing’s chief corporate counsel, whom I sent my reports to the FAA, asking that he investigate the internal corruption and make the necessary reforms so lives were not lost and Boeing would be in compliance with the FAA Production Certificate that allowed it to manufacture airplanes, which I stated would be in the long term interests of the company. I also attempted to negotiate a way for me out of the corrupt company that had retaliated against me for years just because I tried to do my critical job correctly that would not penalize me financially.

Mr. Bain assigned Boeing Attorney Mark Rabe, who had investigated the EELV Lockheed stolen documents affair that is one of the items in the Global Settlement Agreement, and, I believe, was one of the Boeing personnel who helped keep it from being disclosed to anyone for as long as possible, to be my contact on the matter.

Mr. Bain was so concerned by the allegations in my report, that he hopped a corporate jet to fly to Seattle, although Mr. Rabe stated that my matter was not the only reason Mr. Bain almost immediately had hopped that jet after my correspondence to him.

A few weeks went by before Mr. Bain and the Boeing Legal Department made their decision on my request. Unsurprisingly for such a corporation as described above, it was decided by the Boeing Legal Department to do essentially nothing, and instead side with the FAA's biased against public safety non-investigation of my report that continued to foster the "working together" relationship of corruption between the FAA and Boeing that enhanced Boeing's bottom line by placing the flying public and military personnel intentionally at greater risk.

Again, after another sham investigation into my report by the FAA that I managed to get launched in 2003 by Nicholas Sabatini after Boeing Corporate's failure to act, that resulted in just the "final nail in the coffin" of my report by the FAA "burying it alive," in effect, uninvestigated, I contacted Mr. Bain again one last time imploring him to urge the company to end the criminal activity and corruption in BCA Quality Assurance Management before my next obvious step--going public with the story to get public help in ending the corruption within the FAA, and therefore ultimately Boeing once they were under effective and honest oversight of the FAA at last.

Just as in 2002, Mr. Bain took my correspondence very seriously, as he obviously knew the validity of the corruption my report detailed, and the consequences it could have for the company if I succeeded in getting enough public pressure to get the FAA reformed enough to end the corruption at Boeing. He took it so seriously that he actually traveled from Boeing World Headquarters in Chicago to my workplace, which was the equivalent, analogy-wise, of Bill Gates coming to my own house to figure out and fix personally what was wrong (hypothetically, in this case) with the Microsoft software on my computer. It was the end of my shift on or about 10-2-03, when I hopped in my Tahoe in the PSD parking lot and started to drive toward the gate. I drove my Tahoe, characteristically belching a little blue smoke, by a group of three nattily dressed men facing each other talking in the parking lot as I passed the Northeast corner of the factory. I recognized two of the three men--one was Mark Rabe (as I would later confirm, as I didn't know what he looked like and only suspected it was him at the time), and the other was Doug Bain. Of course, they obviously knew who I was as I drove by. Mark Rabe seemed amused at the situation, but Doug Bain had a "deer in the headlights" "caught with his pants down" look on his face as he watched me watching him as I drove by.

However, Doug Bain's presence at my work did not change anything. It is my belief they were only gathered at my work to gage whether or not, by their first hand viewing of me surreptitiously (except when I unexpectedly drove right by them) at work, I would go public with the story of corruption at Boeing as I had said I would do if they did not act to end that corruption first.

I received a call from another Boeing attorney that told me, in no uncertain terms, that they had decided to do what they had done in 2002 about the situation--essentially nothing. The attorney basically dared me to go public, telling me "you gotta do what you gotta do." I tried to impress upon her the seriousness of the situation just before she hung up on me. "This is worse than Enron," I said.

I didn't get to say why the situation at Boeing was worse than Enron before she hung up, but it should be more than obvious. Sure, people lost their livelihoods and money because of Enron's corruption. But Boeing's corruption was and is much worse, threatening not only to take away people's livelihoods, but people's very lives themselves as well. The same can be said about the two matters that are part of the "Global Settlement Agreement," which are essentially corporate espionage and contracting fraud to extract "more value" from both matters than would otherwise legally be possible—no lives were at stake as opposed to in this continuing criminal activity by Boeing.

In the end, I found that no reforms at Boeing would be possible until the FAA itself was reformed and began once again to serve their exclusive duty to protect public safety by performing unbiased and honest oversight of the Commercial Aircraft Industry.

While I prepared to go to the DOT OIG while simultaneously going public to ensure the OIG, who I considered the last real chance to get reform in the quality system at Boeing by their reform of the FAA, acted to perform an effective and impartial investigation of the FAA’s misconduct and "non-oversight" of Boeing that allowed massive levels of rollerstamping to continue unaddressed despite my reporting it in detail to them, I contacted reporters that I would want to break "my story" when the time came, and when I was ready with my report to the OIG.

I failed to realize just how difficult it would be for me to put the report to the OIG together. "Writer’s block" does not begin to describe it. Becoming very depressed after numerous wasted times trying to resolve the situation with the similarly corrupt "working together" partners of the FAA and Boeing, did not help getting the report done either.

But since I had already started developing a relationship with a reporter that I hoped would aid the essential making public of my story when I submitted my report to the OIG, I had to keep that relationship going pending completion of my report.

I gave the reporter information that resulted in stories such as the ones above, trying to hold Boeing accountable for their other crimes besides the ones I had been trying to end for years that dealt with rollerstamping, the related defrauding of Boeing’s private and government customers, and the extra risk Boeing was placing on the public and on the military personnel that flew on Boeing planes without their knowledge of such risk.

A few months turned to many months. Still my report to the OIG was not progressing well.

All the while, Boeing had not forgotten that I had turned them into the FAA and that I might go public with my indisputable evidence that Boeing was far from an ethically reformed company and still was engaged in fraud of even greater scale and seriousness that that detailed in the Global Settlement Agreement. The QA supervisor that had prompted my report to the FAA, and which Boeing knew the corruption of as I had detailed it in the report I gave to corporate headquarters, was promoted. Retaliation and harassment against me for my contact with the FAA and my ethic of still trying to inspect work despite the corruption around me continued from my management. While I was still collecting data to bring Boeing to justice, they were drawing up plans to cut off any attempts by me to use that damning data to go public, and get rid of me at the same time.

On May 17th, 2006, Boeing had me arrested at work for "data theft" and "computer trespass" and suspended me at the same time for "collecting Proprietary, Boeing Limited data, and Competition Sensitive data not required for your job as an inspector" (paraphrasing). I was released the next day and charges have not been filed against me to this date.

On May 23, 2006 I was terminated from The Boeing Company for collecting information related to my report to the OIG, which I was still working on.

Interestingly, during my interview on 5-19-06 by the Boeing Corporate Investigator in charge of the internal investigation of me and my pre-ordained retaliatory termination from the company, the Boeing Corporate Investigator described Boeing as "the most arrogant company on the face of the planet." And this comment from the Corporate Investigator was made just a few months ago, years after Boeing's much self-publicized supposed "ethical reforms." The Investigator also said something very relevant to the Global Settlement Agreement—he said that I would be foolish if I thought a company that was willing to spend $615 million as compensation for past wrongdoing would spare any expense in dealing with me.

During the interview, I was told other inspectors at Boeing had made similar complaints to mine about corruption in Boeing's quality assurance departments.

While, before this revelation, I thought I was pretty much the only inspector brave enough to risk their livelihood in order to try to reform Boeing's Quality System from its current corrupt state because I knew of noone else that was doing so, it was even more disappointing finding out then that many other inspectors at Boeing had also tried to do so, yet the Quality System at Boeing still intentionally remained corrupt at the "most arrogant company on the face of the planet," thanks to Boeing inaction on those complaints and termination of those inspectors like me who did not cease to raise complaints and continued to gather data on Boeing's arrogant flouting of laws and regulations.

Although I had seen extreme hypocrisy, I had never seen such hypocrisy as Boeing exhibited when terminating me, by their attempting to protect themselves from criminal investigations of the utmost severity by having me criminally investigated for attempting to collect information for those investigations.

Again showing their willingness to do anything except tell the truth to protect their own corruption, Boeing did not tell the police they reported me to the reason I was continuing to collect data--that they knew I was a "whistleblower" and was continuing my efforts to bring them ultimately to justice. The police detectives who interviewed me were oblivious to my current and past history as a whistleblower at the company, despite their working with Boeing for around two years up to that point investigating me for what Boeing told them was simple "data theft."



Since I was excommunicated from Boeing, I finally found the time to complete my report to the DOT OIG, Todd J. Zinser.

After a conference call I had with a senior investigator and other personnel in the OIG’s office, the OIG is now engaged in a "preliminary review" to see what is the most appropriate way to proceed and which agency or agencies would be most appropriate to handle the case (as they have been doing for a few weeks now due to the volume of information I have provided them). Soon, I trust, the OIG will launch a full investigation into why the FAA in effect refused to perform their basic oversight responsibilities against Boeing during their sham investigations of my report and in their every day oversight of Boeing that should detect and end such widespread corruption affecting the quality, safety, and reliability of Boeing aircraft that is documented in detail in my report.

I’ve set up a website, www.thelastinspector.com , (not a commercial site, I’ve never made a penny trying to reform Boeing) to make the noted FAA and Boeing corruption public and enlist the public’s support for the OIG to investigate.

I would be honored if you would add your voice to the call of others who have contacted the OIG to request an effective and thorough investigation of the FAA’s Transport Airplane Directorate’s (TAD’s) purposely ineffective oversight of Boeing that has resulted in Boeing’s ability to intentionally not comply with its regulation required FAA-approved quality system on a massive scale affecting both public and military personnel safety. A letter from your office requesting such an investigation to the OIG would be most welcome, especially now, when the OIG is performing the "preliminary review" just prior to the critically required investigation.

After an OIG investigation and the reforms therefrom, an unbiased (except toward public and military personnel safety) and effective TAD will be able, and most importantly, willing, to ensure Boeing complies with its FAA-approved Quality System that ensures the quality, safety, and reliability of Boeing commercial airplanes, including those used as military platforms.

This letter is not motivated in any way by what Boeing did to me personally, which I strongly suspected on the day I decided to report Boeing to the FAA would be a likely result of my report to the FAA, yet I reported Boeing’s criminal activity anyway. I am meerly trying to ensure that you know the current unreformed state that Boeing is in and have the appropriate information to perform your oversight duties of the Global Settlement Agreement in a way that will be beneficial for both the public, the military, and the long term future of Boeing, a future I have no doubt will be bright if the current corrupt management in place at Boeing is replaced that are responsible for the above ongoing criminal activity. Even as a forcibly ex-Boeing employee, I see the difference between the corporate entity that Boeing could be with reforms, as opposed to the current corrupt entity it has been twisted into by its current corrupt management.

As you no doubt can see with the above information, the Global Settlement Agreement as it is is not in anyone’s interest less the interest of the current corrupt management at Boeing. They could not have written a better agreement for their continued criminal ways if they had written it themselves, which, I guess, they essentially did during the negotiation process for the Agreement.

It is essential that you and your committee look toward the future in deciding what you do to or recommend being done to the Global settlement Agreement. It must be written to ensure the still well-entrenched corrupt management at Boeing that endangers national security and the public’s and military personnel’s lives for simply a few more bottom line dollars is dealt with and removed.

It must be remembered that much of this corruption is occurring under the watch of Boeing’s current CEO, Jim McNerney, lest anyone on the committee think that Boeing’s corrupt ways have ended with a new CEO. Mr. McNerney almost certainly approved of my retaliatory termination, as his former direct report, Doug Bain, who Mr. McNerney called Dr. Death, certainly knew about if not personally directed my "termination." In fact, every CEO and President of Boeing since Phil Condit has almost certainly known about my efforts to end the corruption in the Boeing quality system, as Doug Bain, who I made aware of my efforts, reported directly to them. This is not to say that my retaliatory termination is remotely significant when compared to Boeing’s other misdeeds I’ve described in this letter.

And remember, if the fraud in Boeing’s quality system is not ultimately ended by laxly worded agreements like the Global Settlement Agreement that do not take into account Boeing’s "habitual offender" status when it comes to continuing to ignore laws and regulations that might negatively affect the bottom line, more and more military personnel’s lives will be placed in danger. When I was an inspector at PSD, the 737NG Engine Build-Up (EBU) that was built there was always rollerstamped, as any time to actually inspect the EBU per drawing, spec, and plan, as required, was "leaned out" of the production schedule due to Boeing’s efficiency over quality and safety mindset. Consequently, this safety critical airplane component was used by BCA’s CEO, (name), as the "poster-child" for lean manufacturing in his corporate presentations. It did not matter that no 737NG EBU was ever fully inspected to drawing, spec, and plan as required—it was the reduction in production flowtime that trumped such processes, no matter how critical. These same rollerstamped 737NG EBUs are going to be used as propulsion for the MMA, or Multi-Mission Aircraft, a military derivative of the 737NG. Would you want our military personnel flying over the ocean attempting to find and kill an enemy submarine before it launches its missiles at the U.S. with engines that never were inspected as required, and are therefore suspect from a quality, safety, and reliability standpoint? I think not. That is why it is critical this fraud by the FAA and Boeing is stopped. And why Boeing’s conduct in this matter should be considered in your deliberations on the Global Settlement agreement.

Please be mindful of the fact, during the hearing, that, if the Global Settlement Agreement is already in effect and Boeing has not disclosed the wrongdoing of its executives that ensured, after I reported it to them, that rollerstamping and other fraud in Boeing’s quality system could continue on Boeing production lines, which would be a federal crime, that Boeing has already violated the Agreement. Please ask the Justice Department if a disclosure was made for these continuing crimes. I strongly doubt that is the case, because of the ongoing nature of this corruption at Boeing and the FAA.

As I have not contacted the Justice Department thusfar about this fraud, please bring it to their attention during the meeting and ask them why they engaged in such a settlement that allows such an unreformed company to continue to engage in fraud of even more serious nature than that the settlement supposedly ended.

Also, with the detailed information above and any additional information you may request from me subsequently that I will provide, please question Boeing in depth on the history of this fraud at Boeing, why the company refused to do anything to end it, and instead hid behind a similarly corrupt FAA to shield itself from having to take any action to end it.

Boeing and the Justice Department’s answers to these questions should go a long way to face both Boeing and the Justice Department with the reality that they must act to really end fraudulent activity at Boeing. Boeing, faced with your oversight and knowledge of its continued wrongdoing, will finally be forced to act to end this fraud endangering the lives of our troops and fellow citizens, rather than continue it ad infinitum, as they have been attempting to do, despite attempts like mine to stop it.

 

 

Sincerely,



Gerald Eastman

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December 7, 2006

The Honorable Senator John Warner
Chairman
Armed Services Committee
U.S. Senate
225 Russell Building
Washington, D.C. 20510
(202) 224-2023
(202) 224-6295 FAX

Dear Mr. Chairman,

Please have a member of your staff confirm receipt of my July 31st, 2006 faxed letter. I realize it may have been sent too late for use in preparation for the August 1st, 2006 Senate Armed Services Committee Hearing on the Boeing Global Settlement Agreement it was intended for, but I expect that the important information contained in it relating to national security interests and the inability of Boeing to control export of sensitive military technology to our potential enemies would be of interest to you personally and the Committee beyond the noted hearing I sent the information originally for.

Evidence in the letter of Boeing’s theft of competitor and government owned data and efforts to not only defraud its airline customers, but to also defraud the government via product substitution I also suspect may be of interest to you and the Committee beyond the noted hearing.

As stated in the August 1st, 2006 Boeing GSA hearing, Boeing is the country’s 2nd largest defense contractor whose contracts cannot be easily ended no matter how severe is Boeing’s misconduct.

However, while the contracts may not be practical to end, it does not follow that Boeing should not be accountable in the many other ways they can be held responsible when they defraud the government or misappropriate and export sensitive military data illegally.

I realize that this matter may have been one that has/had to be handled in a non-public meeting of the committee due to its sensitivity. Please let me know what, if anything, is being done with the information I forwarded in the noted letter, along with confirming its receipt.

Contrary to what I had believed at the time and noted in my letter, the DCIS investigation that I suspected was in process looking into the illegal export of B-2 composite engineering data I subsequently learned was actually an investigation into another 787 export matter. So, as far as I can tell, this illegal export of B-2 structural composite engineering data has not been investigated by any government agency, nor have I any knowledge of any disclosure by Boeing to the relevant government agencies or Vought/Northrop. Therefore the actions I requested of your office and/or the SASC are even more critical now in ensuring the national security interests and export control law noncompliance issues of this "new" and perhaps grave violation law by Boeing are investigated and corrected to the extent Boeing’s disclosure to proscribed countries and use of this sensitive data without the owner’s permission can be corrected.

If any investigation was performed or disclosure by Boeing was made of these massive violations, it is still imperative that you and the Committee perform oversight of that investigation, due to the grave implications for our nation should such an investigation be misled by Boeing’s seemingly habitual misrepresentations and false statements to government agencies (which statements from Boeing last were documented to my knowledge by State Department investigators during the QRS-11 export violation investigation) in order to escape culpability for their actions. As I stated in my 7-31-06 letter, it is my experience that government agencies do not act (especially against as powerful a company as Boeing) without public pressure (or some other type of oversight, which the SASC can provide in this case).

I can say with some confidence that any such investigation, if existent, by a government agency (if unbiased) has not concluded yet. Such an investigation would result in charges or fines that would be highly publicized, and I have not seen anything in the press to indicate such charges or fines. As noted in my prior letter, violation of the law by Boeing on this issue is certain. Such charges and/or fines would therefore seemingly be mandatory for any such investigation. Although Boeing did replicate some R&D they copied directly from the B-2 data into Boeing’s own specifications almost certainly illegally in order to "make that data their own," that does not remedy the illegal transfer of that data into those specifications and the fact that those resulting "Boeing" specifications and even the entire B-2 structural design allowables manual itself were not controlled as such sensitive military data should have been per the ITAR regulations and therefor all of that data could be in any proscribed country’s hands now due to these actions.

Post the midterm elections, I think any Congressional representative of any political stripe now understands the importance of Congressional oversight functions to the public in ensuring the integrity of government agencies under that oversight. It is in that sprit that I hope you approach the issues raised in my letters and the actions that need to be taken therefrom.

I leave this issue in your office and the Committee’s hands. Please ensure the relevant government agencies are contacted to find out the status of their investigations, if they exist at all, and ask them to initiate the proper investigations if they have not, and place those investigations under your oversight. If investigations have been done, please initiate the proper review of those investigations by having those/that investigation’s reports forwarded to you and/or the Committee.

Something that I don’t think has been disclosed publicly or investigated that should be ensured is investigated by the SASC and/or your office is the transfer of "Boeing" composite process specifications to the University of Washington intentionally by Boeing to "get around" ITAR regulations. This was done by Boeing to make the specifications "public data" and not therefore supposedly not subject to ITAR regulations because "public data" is exempted specifically by the regulations. I believe this skirted the intent if not the letter of the law just so Boeing did would not have to go through the required ITAR process and therefore composite components could be more readily outsourced to proscribed countries and other countries for cost savings to improve Boeing’s bottom line. Please ensure this transfer is investigated and that the noted specifications did not contain B-2 data as well as any other sensitive military origin data or data Boeing "borrowed" from other companies and/or DOD funded R&D it did not have rights to or rights to disclose. The analogy to the above is would the making public of government classified data by a company without the government’s permission make the classified data unclassified? The answer to that is obviously no.

It will be important that your office and/or the Committee review any such investigation in detail to ensure that Boeing did not mislead the investigators such as they (in my opinion) misled the press about the issue, whether it is about the seriousness of the violations, the violations’ extent, the extent of possible dispersal of sensitive military data to proscribed countries and/or foreign nationals that may have had access to it, the extent of transfer of military and competitor sensitive data into Boeing’s own specifications and/or engineering drawings for any of its commercial aircraft models (the 777 and 787 and derivatives of the original 737, 747, and 767 especially), and the source of the data used for commercial airplanes (whether, as Boeing I suspect disingenuously asserts in the articles in my prior letter, that it was only commercial owned composite R&D data that was used in the 777 and later other model derivatives, or that it was, as I think the facts and other information in the articles support, that it was all or some portion of the military composite data that was copied into commercial data without the required licenses and permissions).

Boeing does have a history of intentionally ignoring export laws even after they are investigated for such acts and are fined and promise the government to not violate such laws meant to protect national security interests in the future to suit its own much narrower commercial interests (sometimes as limited as paperwork and delivery timing interests, such as in the QRS-11 case of blatant violations of export laws to meet delivery date commitments per Boeing’s schedule). If, as strongly seems to be the case, this military composite data theft and dispersion without the necessary licenses or permissions is just another such case (and the most massive one yet, I may add), it will be the fifth such instance, four of which occurred at Boeing itself, and not at companies before they were absorbed by Boeing.

If your office and/or the Committee have not taken action as I had requested in my prior letter, please re-read the letter and ensure the correct actions are taken, as well as the similar above actions to protect our national security and employ sanctions on Boeing (if investigations and/or oversight reveal wrongdoing in this matter) severe enough that it will never violate export laws again and again as it has done in the past, sometimes demonstrably in an intentional manner as in the QRS-11 case, as well as removing all sensitive military data it used without licenses or permission from all Boeing specifications and engineering drawings, as well as placing ITAR covered data such as the B-2 structural composite design allowables manual and specifications and drawings containing such data under the proper controls to preclude disclosure to foreign nationals and/or proscribed countries without the necessary licenses or contractually required permissions. This will be a difficult task, especially after the GSA hearing where (in my opinion) Boeing got off very lightly. To be a significant punishment for Boeing, sanctions should affect the stock price in a dramatically negative fashion, which did not happen in the case of the GSA agreement.

Please keep me informed on what the committee is doing in this important national security matter and forward this information to the relevant agencies as necessary, maintaining oversight of their actions.

And, of course, I would still appreciate your individual action to help end the fraud at Boeing that brought these other issues to my attention by contacting the DOT OIG’s office and supporting their investigation and requesting a copy of their report when the investigation is finished. Military hardware that is supposed to protect our troops that are under the purview of the SASC are also affected by the right outcome of the OIG’s investigation, in addition to the safety of commercial transport aircraft. Please also let me know your decision in that regard as well.

I would also like to know if your question during the August 1st, 2006 Boeing GSA SASC hearing to Boeing CEO Jim McNerney about protections for whistleblowers at Boeing was as a result my 7-31-06 letter. That was the only question during the noted hearing I heard that showed any evidence my letter might have been read. Of course, as you know, most Senators did not attend the hearing. If your question was as a result of my letter, thank you for it. It seemed to catch Mr. McNerney off guard. I thought his answer was less than truthful because I (among other former Boeing employees) are tangible examples that there are no such whistleblower protections at Boeing. They will find some reason to terminate employees if they insist on pressing for even minimal reforms at Boeing, I have found. The fact that Mr. McNerney likely approved my termination makes his answer to your question extremely hypocritical, in my view.

If you require any additional information or clarification of the matters covered in the this or the prior letter, I can be contacted with the contact information on the cover letter.

I will be sending a similar letter to all SASC members, as well as posting a generic copy of this letter and the prior letter on my website, www.thelastinspector.com, as well as issuing a Press Release. If your office has misplaced my prior letter, please let me know and I will re-fax it to you.

Sincerely,



Gerald Eastman