Federal officials in Los Angeles today charged two former Boeing Company
managers with conspiring to steal Lockheed Martin trade secrets concerning
a multi-billion rocket program for the United States Air Force.
In a criminal complaint filed this afternoon in United States District
Court in Los Angeles, Kenneth Branch and William Erskine were each charged
with conspiracy, theft of trade secrets and violating the Procurement
Integrity Act.
Branch, 64, and Erskine, 43, both residents of Cape Canaveral, Florida,
are former managers of Boeings Evolved Expendible Launch Vehicle
(EELV) program, which was based in Huntington Beach, California, and had
facilities in Cape Canaveral. The EELV is a rocket launch vehicle system,
such as the Atlas or Delta rocket system, which is used for the transportation
of commercial satellites into space. EELVs are also used to launch Government
satellites into space.
In 1997, the Air Force announced that it wanted to procure EELV services
from both Boeing and Lockheed Martin, and that it wanted both aerospace
companies to invest their own money in the EELV program because there
was a potential for substantial profits to be made by using EELVs to launch
private communication satellites. The Air Force agreed to provide both
Boeing and Lockheed Martin $500 million each for development costs associated
with their respective EELV program, and both Boeing and Lockheed Martin
agreed to pay any additional development costs.
According to an affidavit in support of the criminal complaint filed today,
Branch was a Lockheed Martin EELV engineer who in 1996 was recruited by
Erskine, a Boeing EELV engineer, to bring proprietary Lockheed Martin
EELV documents to Boeing. In exchange for the proprietary Lockheed Martin
documents, Branch would receive employment at Boeing, as well as a higher
salary. Branch left Lockheed Martin in January 1997 and began working
at Boeing on Boeings EELV project.
On July 20, 1998, Boeing and Lockheed Martin submitted bids for 28 EELV
contracts being awarded by the Air Force. The total value of the contracts
was approximately $2 billion. On October 16, 1998, based largely on price
and risk assessment, Boeing was awarded 19 out of the 28 contracts, and
Lockheed Martin received the other nine EELV contracts.
In mid-June 1999, according to the affidavit, Erskine told another Boeing
employee that "he had hired defendant Branch because defendant Branch,
while still working at Lockheed Martin, came to defendant Erskine with
an under-the-table offer to hand over the entire Lockheed
Martin EELV proposal presentation to aid in Erskines proposal work
in exchange for a position at Boeing if Boeing won the United Sates Air
Force EELV contract award."
Later in June 1999, a Boeing attorney assigned to interview Branch and
Erskine regarding allegations that they possessed proprietary Lockheed
Martin documents conducted a search of Erskines and Branchs
offices and, according to the affidavit, found a variety of documents
marked "Lockheed Martin Proprietary/Competition Sensitive" in
their offices.
In early August 1999, Branch and Erskine were terminated by Boeing.
Air Force personnel familiar with the EELV competitive-bidding process
examined the Lockheed Martins documents recovered from Branchs
and Erskines work spaces at Boeing. The investigation determined
that:
- 141 documents, consisting of more than 3,800 pages, which appeared
to belong to Lockheed Martin were recovered from the work spaces of
Branch and Erskine in June 1999;
- 36 of the documents were labeled "Lockheed Martin Proprietary
or Competition Sensitive;"
- 16 of the documents appeared to be related to the manufacturing cost
of Lockheed Martins EELV and, in the opinion of the USAF EELV
staff, possession of these proprietary documents by a competitor could
have had a "medium" or moderate chance of affecting the outcome
of a competitive bid; and
- seven of the documents appeared to be related to the manufacturing
costs of the Lockheed Martin EELV and, in the opinion of the USAF EELV
staff, possession of these proprietary documents by a competitor could
have had a "high" or significant chance of affecting the outcome
of a competitive bid.
The USAF EELV analysts determined that, had they known that Boeing EELV
personnel had possession of proprietary Lockheed Martin EELV documents
in 1997, they would have immediately suspended the competition and conducted
a thorough investigation into whether the procurement competition should
be terminated.
"The charges against Mr. Branch and Mr. Erskine allege that they
violated the fundamental rules of fair play," said United States
Attorney Debra W. Yang. "By covertly using a competitors secret
information, they caused harm not only to Lockheed Martin, but also to
the Air Force and taxpayers who finance government operations. Their improper
conduct had huge ramifications because of the value of the contract."
A criminal complaint contains allegations that a defendant has committed
a crime. Every defendant is presumed to be innocent until and unless proven
guilty.
Branch and Erskine will be summoned to appear for an arraignment in United
States District Court in Los Angeles. The arraignments will likely take
place next month.
If they are convicted of all three counts in the complaint, both Branch
and Erskine face a maximum possible penalty of 15 years in federal prison
and fines of up to $850,000.
The charges against Branch and Erskine are the result of an investigation
conducted by the Defense Criminal Investigative Service.
CONTACT: Assistant United States Attorney Christopher Johnson
(213) 894-2688
Assistant United States Attorney Christine Adams
(213) 894-8692
Release No. 03-95
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