Boeing 2005 Annual Report Download - page 82

Notes to Consolidated Financial Statements
the implementation of remedial measures. The Court is cur-
rently considering a Motion to Dismiss filed jointly by the indi-
vidual Board member defendants and us.
In October 2003, a third shareholder derivative action was filed
against the same defendants in federal court for the Southern
District of New York. This third suit charged that our 2003
Proxy Statement contained false and misleading statements
concerning the 2003 Incentive Stock Plan. The lawsuit sought
a declaration voiding shareholder approval of the 2003
Incentive Stock Plan, injunctive relief and equitable accounting.
This case was dismissed by the court and the U.S. Court of
Appeals for the Second Circuit affirmed the dismissal on April
15, 2005. The plaintiff moved for rehearing en banc before the
U.S. Court of Appeals for the Second Circuit and that court
denied the plaintiff’s motion. The plaintiff has filed a notice that
it will seek United States Supreme Court review.
It is not possible at this time to determine whether these share-
holder derivative actions would have a material adverse effect
on our financial position.
Department of Justice Investigation Regarding Darlene Druyun
and Mike Sears On November 24, 2003, our Executive Vice
President and Chief Financial Officer, Mike Sears, was dis-
missed for cause as the result of circumstances surrounding
the hiring of Darleen Druyun, a former U.S. Government official.
Druyun, who had been vice president and deputy general man-
ager of Missile Defense Systems since January 2003, also was
dismissed for cause. At the time of our November 24
announcement that we had dismissed the two executives for
unethical conduct, we also advised that we had informed the
USAF of the actions taken and were cooperating with the U.S.
Government in its ongoing investigation. The investigation is
being conducted by the U.S. Attorney in Alexandria, Virginia,
and the U.S. Department of Defense (U.S. DoD) Inspector
General concerning this and related matters. Subsequently, the
SEC requested information from us regarding the circum-
stances underlying dismissal of the two employees. We are
cooperating with the SEC’s inquiry. In 2004, Druyun and Sears
each pleaded guilty to a single conflict-of-interest-related crimi-
nal charge arising from Druyun having engaged in employment
discussions with Sears more than two weeks prior to disquali-
fying herself from participating in USAF business involving us.
At her sentencing, Druyun and the government asserted that
she gave us favorable treatment on the USAF 767 Tanker
negotiations, NATO AWACS claim, C-130 AMP Contract
award, and C-17 negotiations in 2000, and that this treatment
was influenced by employment negotiations and relationships
with us. It is not possible to determine at this time what further
actions the government authorities might take with respect to
this matter, or whether those actions would have a material
adverse effect on our financial position.
Securities and Exchange Commission (SEC) Pension
Accounting Inquiry On October 13, 2004, the SEC requested
information from us in connection with an inquiry concerning
accounting issues involving pension and other postretirement
benefits at several companies. We are cooperating with the
SEC’s inquiry. Although an SEC spokesman has publicly stated
that the agency has no evidence of wrongdoing, we cannot
predict what actions, if any, the SEC might take with respect to
this matter and whether those actions would have a material
adverse effect on our financial position.
Employment discrimination litigation We are (or were) a defen-
dant in nine employment discrimination matters filed during the
period of June 1998 through January 2005, in which class cer-
tification was or is being sought or has been granted. Three
matters were filed in the federal court in Seattle; one case was
filed in the federal court in Los Angeles; one case was filed in
state court in California; one case was filed in the federal court
in St. Louis, Missouri; one case was filed in the federal court in
Tulsa, Oklahoma; one case was filed in the federal court in
Wichita, Kansas; and the final case was filed in the federal
court in Chicago. The lawsuits seek various forms of relief
including front and back pay, overtime, injunctive relief and
punitive damages. We intend to continue our aggressive
defense of these cases.
The lawsuits are in varying stages of litigation. One case in
Seattle alleging discrimination based on national origin resulted
in a verdict for the company following trial and is now on
appeal. One case in Seattle alleging discrimination based on
gender has been settled. Three cases - one in Los Angeles,
one in Missouri, and one in Kansas, all alleging gender discrimi-
nation - have resulted in denials of class certification; the deci-
sion in the Los Angeles case was affirmed on appeal, the
decision in the Kansas case is on appeal, and the Missouri
case has been dismissed with prejudice. The case in
Oklahoma, also alleging gender discrimination, resulted in the
granting of class action status; we have challenged that ruling,
and the Oklahoma court is awaiting the ruling in the Kansas
appeal before deciding whether the case can proceed to trial.
In the second case alleging discrimination based on gender in
California, this one in state court, we are seeking to have the
case dismissed in light of the successful outcome of the appeal
of the denial of class certification in the companion federal
court case in Los Angeles. The court certified a limited class in
the race discrimination case filed in federal court in Seattle
(consisting of heritage Boeing salaried employees only) and
after trial on the claim of disparate treatment in promotions the
jury returned a verdict in our favor; the court has also ruled in
our favor on the claim of disparate impact. The final case, also
alleging race discrimination and filed in Chicago, seeks a class
of all individuals excluded from the limited class in the Seattle
case. We anticipate that the court will determine whether the
case can proceed as a class action in late 2006.
BSSI/ICO litigation On August 16, 2004, in response to a draft
demand for arbitration from ICO Global Communications
(Operations), Ltd. (ICO) seeking return of monies paid by ICO
to Boeing Satellite Systems International, Inc. (BSSI) under
contracts for manufacture and launch of communications satel-
80 The Boeing Company and Subsidiaries