Boeing units suspended; MCI faces debarment: corporate scandals bring penalties for contractors.

In a rare slap at two of the government's largest contractors, three Boeing Co. units and MCI WorldCom have been declared ineligible for federal contracts as a result of separate ethics investigations.

Boeing

The Air Force suspended Boeing's Launch Systems, Launch Services,

Boeing was also stripped of seven of its 19 scheduled Delta rocket launches; those launches were given to Lockheed Martin. Air Force Undersecretary Peter Teets said Boeing stands to lose about $1 billion in revenue.

The suspension is indefinite; however, Teets said it might be lifted in time for the next round of competition for launches, set to begin late this year, if Boeing makes satisfactory changes in its ethics programs.

"If Boeing were to not take corrective actions, if Boeing were to not respond strongly to this matter, then we would take into consideration the potential for debarment," he said at a July 24 Pentagon briefing. But he added that it is in the government's interest for Boeing to remain in the space business, so there will be two strong competitors.

The Justice Department is conducting a criminal investigation of Boeing's activities. Two former employees have been indicted in Los Angeles in the case.

The Air Force investigation found that one of those former employees had worked for Lockheed Martin, and brought proprietary documents with him when he joined Boeing.

"I have never heard of a case of this scale," Teets said.

"First, the extent of Lockheed Martin proprietary material in Boeing possession at the time of (launch) source selection was extraordinary--approximately 25,000 pages. Second, the quality of information was sufficient to provide great insight into Lockheed Martin's proprietary cost and pricing. Third, Boeing was not forthcoming with the Air Force about the amount of Lockheed Martin data in its possession, and it took a period of approximately four years for them to provide us with all of it."

Boeing CEO Philip Condit apologized for the employees' actions. The company has appointed former senator Warren Rudman (RNH) to lead a review of its policies on ethics and the handling of competitive information.