The Boeing aircraft company pleaded guilty yesterday in U.S. District Court here to making more than $7 million in secret payments between 1973 and 1977 to overseas middlemen in the sale of $343 million worth of passenger planes to four countries.
In a plea agreement accepted by Judge John H. Pratt, Boeing agreed to pay $400,000 in criminal fines and an additional $50,000 for concealing the payments from the government's Export-Import Bank, which financed up to 45 percent of the purchases and unknowingly paid at least part of the commissions.
The payments to individuals in Spain, Lebanon, Honduras and the Dominican Republic were not necessarily illegal, Justice Department attorney Michael Fayad told Pratt, but concealing them violated federal law.
The Seattle-based company admitted that it made "irregular commission" payments on 40 occasions to people in those four countries and that it filed "false and fraudulent" statements with the bank saying that no such commissions had been paid.
The Justice Department brought no charges against Boeing officials, although papers filed as part of the plea agreement indicate that company chairman Thornton A. Wilson and other top officials were aware, at least in one instance, of the payments.
Boeing's plea agreement, and the decision not to prosecute individual corporate officers, is in keeping with Justice Department policy in the last several years, one official said. The department has settled overseas-payment cases against Lockheed, McDonnell Douglas, Control Data Corp., Westinghouse and several other companies without charging corporate officials.
However, the 1977 Foreign Corrupt Practices Act strengthened and clarified the law on such payments, and department sources said yesterday they are confident that in future cases individual officers will face prosecution.
In a brief hearing yesterday, Wilson and his attorney, Edward Bennett Williams, said Boeing was guilty of 40 counts of making false statements to the Ex-Im Bank, and Wilson gave department officials a company check for $450,000.
The company pleaded guilty to making $7.3 million in secret payments on the sales of 35 planes worth more than $343 million. The Ex-Im Bank provided $143.4 million in loans to finance the sales.
The Spanish airline, Iberia, bought 29 of the planes; Middle East Airlines in Lebanon bought three; the Dominican airline, Corde, purchased two, and the Honduran airline, Servicio Aero de Honduras, bought one.
In two countries, Boeing paid money directly to, or at the behest of, a top airline official as part of the sale, according to papers filed in the plea agreement. The company said it paid $350,000 in secret commissions to Hector Rolando Figueroa, general manager of the Honduran airline, which bought a 737 for almost $6 million. It also paid $3.6 million to a Liechtenstein corporation at the request of Asad Nasr, the general manager of the Lebanese airline, which purchased three 747s for $101 million.
In the case of Iberia, which purchased $221 million worth of 727s, Boeing paid a $3.3 million commission to its sales representative despite the Spanish government's insistence that no commissions be paid.
Wilson, then president of Boeing, assured a Spanish government official that no commissions would be paid, according to papers filed in court, and sent James E. Prince, a senior Boeing executive, to Madrid to negotiate termination of the agreement with its Madrid sales representative. But Prince and other Boeing employes decided to sign three agreements with the representative, including one that gave him a $116,000 commission for each plane sold to Iberia.
According to the department's filing yesterday, which was not challenged by Boeing, Prince advised Wilson that the matter "had been settled, and that the settlement had been expensive." Wilson then wrote Spanish officials that the commissions had been eliminated by termination of the company's contract with the sales respresentative, and that the price of the aircraft would be adjusted accordingly. But Wilson did not tell the Spanish officials about the more than $3 million in commissions the company was paying the agent.
In January, 1980, Iberia sued Boeing in U.S. District Court here for $72 million in damages as a result of the secret commissions. The suit was settled last October for $3.4 million in credits that the company offered the airline.
The Dominican commission was $30,000 for the purchase of two 727s for about $15 million.