Boeing and Its Chairman Let Off of Bribery Charges

A settlement announced on October 2 between the Boeing Company and Spain's Iberia airlines spares both Boeing and its chairman, T.A. Wilson, considerable embarrassment.

In February, 1980, Iberia brought a $72 million lawsuit against Boeing, charging the company with "fraud, breach of agreement and fraudulent concealment" in regards to questionable payments Boeing allegedly made in 1971 to secure the sales of 29 Boeing aircraft to Iberia. The price of the contract was $231 million.

According to Iberia's suit, Iberia discovered in July, 1971 that Boeing had been paying "sales commissions to an agent" on contracts Boeing wished to make with Iberia.

Upset by these commissions, Iberia allegedly told a Boeing senior vice-president on July 31, 1971 that "this practice was not acceptable" and "must stop." lberia, the suit maintains, before going through with the purchase of the 29 planes, demanded that Boeing "terminate all arrangements for sales commissions" and "that the final sales price of the aircraft had to be fixed [adjusted] on the basis that commissions would not be paid on these sales."

Here's where Wilson comes in. "On August 23, 1971, the then president (and now chairman) of" Boeing, the suit stated, wrote Iberia assuring it that Boeing had agreed "to settle and terminate the arrangements:" with the person to whom Boeing had been paying commissions. "In this same letter," Iberia alleged, Wilson said that Boeing "'would provide an adjustment in the overall pricing to reflect this adjustment in our arrangements.'"

Wilson's statements, Iberia charged, "were false, were known by (Boeing) to be false," and moreover, Boeing "intended, in pursuance of its fraudulent scheme, to deceive plaintiff and others by making such false statements and then by concealing their falsity."

The case is now closed, Boeing having agreed to provide $3.4 million-the amount of the alleged commission-in credits to Iberia. "We recovered actual damages," says one Iberia lawyer, adding that demands for "punitive damages" were dropped because "we don't know if they would have been awarded" and "it's very expensive and time-consuming to go to a full-blown trial."

Denying any wrongdoing, Boeing claimed "the dispute arose over a misunderstanding" and "the settlement was reached in the interests of improving business relationships between the parties."

Boeing and chairman Wilson, however, may not have heard the last of this episode. The U.S. Export-Import Bank, which financed 40% of the $231 million contract, may also have been "defrauded" by Boeing's "fraudulent scheme," the Iberia lawsuit alleged. Exim would not comment either directly or in response to a Freedom of Information Act request, saying only that any materials about possible wrongdoing are passed on to the U.S. Justice Department.

The Justice Department, in response to another Freedom of Information Act request, refused to release any documents, claiming that the case was "under investigation."