The Justice Department dropped criminal charges against four McDonnell Douglas Corp. executives yesterday because a top department official said he felt the overseas-bribery case against them was an "unfair" use of the criminal law, one that judged past conduct by the stricter "new morality" of today.
In an extraordinary hearing before U.S. District Court Judge Joyce Hens Green, Sanford N. McDonnell, chairman of the board and chief executive officer of the St. Louis-based aircraft manufacturer, answered "yes" 10 times when Green asked if the company were pleading guilty to criminal charges of wire, mail fraud and false statements in its sale of DC10 jetliners to Pakistan in the early 1970s. Green fined the firm the maximum $55,000.
In addition, the company agreed to settle a companion civil suit by paying $1.2 million to the U.S. Treasury. Of that, $192,500 will go to pay off a loan owed by Pakistan's national airline to the Export-Import Bank.
Lawyers familiar with the case have called dropping the criminal charges "unprecedented," especially since nothing in the case has changed and weakened the government's evidence.
In court papers, Justice lawyers said they were dropping charges against the McDonnell executives after considering the desirability of a prompt and certain disposition of the case, the expense of trials and appeals, and "federal law enforcement priorities and departmental resources."
Associate Attorney General Rudolph W. Giuliani, the department's No. 3 official who approved the plea agreement, said after the hearing that he decided to drop criminal charges against individuals because he felt the mail and wire fraud laws were "stretched beyond the limit" in alleging that the government of Pakistan had been victimized.
Giuliani said government evidence showed a valid case against McDonnell and its officials, but "in exercising prosecutorial discretion, there didn't appear to be a fair case against the individuals."
"It's one thing when you're talking about the corporation and dollars, and another when you're talking about people's liberty," Giuliani said. "In reviewing the case, I had real doubts they the corporate executives knew they were committing crimes in 1973. It appeared to be an ex post facto application of the new morality."
Incidents alleged in the indictment occurred before bribing foreign officials was against U.S. law. The administration is seeking changes in the Foreign Corrupt Practices Act of 1978 to deal with what officials call the reality of American corporations trying to compete abroad. Critics say the effort effectively will gut the act.
McDonnell and its executives were indicted in the fall of 1979 in the first overseas bribery case that included individuals.
The case stirred controversy early this summer when two Justice attorneys handling it complained that Giuliani had discussed the charges with a McDonnell attorney without their knowledge. That meeting was set up by Sen. John C. Danforth (R-Mo.).
McDonnell attorney Veryl L. Riddle told Judge Green that the company disputed the government's "offer of proof" that said millions of dollars in commission payments made to sell planes to Pakistan, Korea, the Philippines, Venezuela and Zaire were really "commercial bribes."
The offer of proof said that McDonnell executives Charles M. Forsyth and John Brizendine, two of those indicted, decided to continue the secret commission scheme to "keep the sale" after company auditors uncovered the scheme. In 1974, Forsyth told an employe to take some incriminating documents about the Pakistani commissions home and hide them under his bed, the government said.
Criminal charges against James S. McDonnell III, son of the firm's founder, and Sherman Pruitt Jr. also were dropped. A separate perjury case against Pruitt is continuing.