Source: Boeing to Settle Justice Department Procurement Suit for $615M

Boeing Co. (BA) has reached a tentative settlement with the government that calls for it to pay $615 million to end a three-year Justice Department investigation into reported defense contracting scandals, a federal official familiar with the details of the agreement said Monday.

While agreeing to the largest financial penalty ever imposed on a military contractor, Boeing will not face criminal charges or have to admit wrongdoing, said the official, who spoke on condition of not being identified by name because the pact is not yet final.

A settlement could go a long way toward helping the company — the second-largest U.S. defense contractor behind Lockheed Martin Corp. — in its effort to distance itself from recent procurement controversies that tainted its reputation. Jim McNerney has made a settlement a top priority since taking over as chairman and CEO last July.

The federal official told The Associated Press that the company pressed to complete negotiations before its annual investor conference Wednesday in St. Louis. McNerney and other executives are scheduled to discuss Boeing's performance and outlook during that meeting.

Boeing spokesman John Dern said Monday that the company could not immediately comment.

Chicago-based Boeing has been under investigation for allegedly improperly obtaining thousands of pages of secret documents from Lockheed in the late 1990s, using some of them to help win a competition for government rocket-launching business, and separately for recruiting Air Force official Darleen Druyun while she was still overseeing contracts involving prospective Boeing deals. The government stripped Boeing of about $1 billion worth of rocket launches for its improper use of the Lockheed documents.

Druyun served nine months in prison in 2005 for violating federal conflict-of-interest laws. Michael Sears, formerly chief financial officer at Boeing, spent four months in federal prison last year for illegally recruiting her.

While the company still faces pending civil claims by Lockheed, the $615 million payment is less than some analysts expected the cash-rich company to have to make. Justice Department prosecutors reportedly had originally sought more than $750 million in penalties.

"What the positive comes from is their ability to really start to put this behind them," said Morningstar analyst Chris Lozier. "I don't think they were losing contracts... any more because of this, but certainly this would help people erase any question from their minds about whether Boeing was on the up-and-up."

Standard & Poor's credit rating agency said the settlement would have no impact on its outlook for Boeing, which it upgraded to positive last Thursday. Analyst Roman Szuper said in a note to investors that the large fines would be manageable for Boeing given its cash resources of nearly $10 billion and continued strong financial performance.

The Wall Street Journal, which reported the tentative settlement Monday, cited unidentified people familiar with the details as saying prosecutors have agreed not to pursue Boeing or its executives as long as the company and its senior executives avoid running afoul of the law during the next two years.

The Journal said the agreement requires stepped-up outside oversight of Boeing's compliance with tough ethics rules it drew up in the wake of the scandals. If the company or any of its top-ranking executives become caught up in new criminal investigations, Boeing also would be subject to criminal prosecution and additional penalties stemming from old cases.

Boeing shares fell $1.15, or 1.3 percent, to close at $85.86 on the New York Stock Exchange. The stock hit an all-time high of $89.58 last Wednesday.