Ethics Newsline®

CHICAGO
The Boeing Company last week reported a $160 million loss in the wake of a settlement with the government over ethics charges, and also agreed to forego deducting the cost of the settlement from its income tax.

According to the New York Times, the decision to pass up the deduction comes at a time when Boeing is trying to polish its image in Washington as CEO W. James McNerney prepares to appear before the Senate Armed Services Committee to answer questions about the firm’s actions.

BusinessWeek reported that several senators previously voiced reservations about the terms of the $160 million in civil and criminal penalties and fines because Boeing could exploit a tax-law provision that would have allowed it to write off the settlement. Aerospace analyst Richard Aboulafia told BusinessWeek that it was a “savvy move” for Boeing to “eat the cost” and not make itself a target.

In agreeing to the settlement, McNerney admitted that “a few years ago, certain Boeing employees did some things that were wrong,” and said Boeing had to accept responsibility for the actions of those employees, the Seattle Times reported.

McNerney referred to a scandal involving Boeing’s hiring of a former Air Force procurement officer who improperly steered billion-dollar procurement contracts to the firm, and another case involving midlevel employees stealing proprietary pricing information from rival Lockheed Martin.

McNerney told analysts and company officials on a conference call: “Without question, the short-term financial impact of the tax deductability issue is significant,” according to a report from the U.K. Guardian. “However, the long-term value of Boeing’s reputation is even more significant.”