Boeing Co. Gouges Taxpayers $1,679 for $8 Spare Part: So That's How it Made a Profit!

A week after Boeing announced a 13 percent, $586 million first-quarter profit, we learn about some oldie-but-goodie sales practices that have helped keep the Lazy B solvent: Charging $644.75 for a tiny plastic motor gear that should cost only $12.51, and pricing a dime-sized plastic roller assembly at $1,678.51 when it was worth just $7.71.

The buyer that didn't beware was the Army, purchasing parts from Boeing for the CH-47 Chinook helicopter. According to a report yesterday by the Pentagon's Inspector General, Boeing - which won't comment on its price gouging - charged the Army about $13 million or 131.5 percent more than fair and reasonable prices for orders on 18 different chopper parts. In other words, the defense contractor gouged taxpayers $23 million for $10 million in parts. That's got to make a Boeing worker proud.

During the Inspector General's audit, a slightly repentant Boeing issued the Army a credit for $324,616 for one of the defectively priced parts. After the IG issued its draft report, Boeing provided additional refunds of about $1.3 million. But, says the IG, Boeing still owes the Army a refund of $6.3 million to $10.9 million, plus another $538,688 for failing to meet requirements on another contract.

Boeing of course is an old hand at contract fraud and other violations, usually coming in second only to Lockheed Martin in the defense contractor hall of shame. The company's ethical lowlights include being caught with 25,000 pages of stolen military-satellite documents from rival Lockheed Martin that helped Boeing win a nearly $2 billion defense contract.

It was supposed to be a new ethical era for the "Sleazy B" after Phil Condit's reign of error. But there's a historic strain of corruption that continues to run through Boeing corporate offices, one that has at times been stupendous in its scope. We're reminded of what we wrote a few years back:

In 1982, then-chair T.A. Wilson strolled into federal court, entered a guilty plea on criminal charges that Boeing failed to disclose millions in "irregular commissions" (payoffs) related to the sales of commercial airliners overseas, handed over a $450,000 check, and strolled out. In 1989, Boeing admitted to trafficking in classified Pentagon documents and paid a $5 million criminal penalty. As prosecutors, shareholders, and company officials understood, that was the cost of doing business. Just don't do it too often. Don't get too arrogant. And don't throw it in the nation's face, as Condit, in what was perhaps his first big mistake, did in 2000. Desperate to obtain a favorable China trade vote, he announced in D.C. that Boeing "will be supporting people [politicians] that believe in the direction we do." To some, it was the biggest payoff offer of all time: a bribe to all of Congress.
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