News Column

Honest Services Fraud Question Annoys Boeing CEO at Shareholder Meeting

April 28, 2014



WASHINGTON, April 28 -- The National Center for Public Policy Research issued the following news release:

David Almasi (http://www.nationalcenter.org/bios/almasi.html) of the National Center for Public Policy Research made himself the most unpopular person the room at the Boeing shareholder meeting in Chicago today after he asked company chairman and CEO W. James McNerney about conflicts of interest between Boeing's philanthropy and actions by senior public officials, and raised the question of whether Boeing had unnecessarily exposed itself to the danger of being prosecuted for honest services fraud.

Almasi was following up on a April 13Washington Post story (http://www.washingtonpost.com/politics/for-hillary-clinton-and-boeing-a-beneficial-relationship/2014/04/13/21fe84ec-bc09-11e3-96ae-f2c36d2b1245_story.html) by Rosalind Helderman, who reported that Boeing made a $900,000 contribution to the Clinton Foundation and a $2 million donation important to then-Secretary of State Hillary Clinton in the same timeframe that Secretary Clinton made what she called "a shameless pitch" to Russia's state airline on Boeing's behalf.

Almasi asked Mr. McNerney, in part (full question here): (http://www.nationalcenter.org/BoeingShareholderQuestion2014.pdf)

The official purpose of our Company's $900,000 donation to the Clinton Foundation was to build schools in Haiti. Assuming that building schools in Haiti was a key goal of this Company's philanthropic programs in 2010, why was it so important to support this work specifically through the Clinton Foundation, and not one of the many other reputable, independent charities then working in Haiti? By donating to the Clinton Foundation within months of receiving a huge favor from the Secretary of State, did we not expose both our Company and the Secretary of State to the risk of being charged with honest services fraud?

Almasi further asked:

There is at least one lobbyist in jail right this minute for giving public employees travel and meals worth far, far less than $900,000. He claims he didn't intend bribery; that what he did was business-as-usual. But he's in jail now, nonetheless.

Why would we risk federal charges by making a donation to the Clinton Foundation at a time when our Company had such a clear conflict of interest? It seems reckless and unnecessary, even if it was not illegal. Are we operating under the assumption that our Company is too big to be charged with honest services fraud or bribery even as little guys go to jail for it?

If so, may I politely remind the Company of questions raised in 2003 by the National Legal and Policy Center, (http://www.nlpc.org/) also regarding our interactions with government officials, which resulted in two Boeing executives, including our CFO, going to prison, the resignation of our CEO, and over a half a billion dollars in fines?

In response, Mr. McNerney, who clearly was annoyed by Almasi's question, said he disagreed with almost everything Almasi said, and said he was "confident" Secretary Clinton "would have advocated for Caterpillar's tractors or GE's turbines with equal fervor... with or without these few donations."

Mr. McNerney also said he was "highly confident that we followed the letter and the spirit of the law" despite the National Center's "indication that you made which is that it is beyond the pale."

Mr. McNerney concluded by saying, "I appreciate the secretary's support overseas" and added the "commercial advocacy by people that lead our country is highly appreciated by those of us toiling in the vineyards."

"There were people in the room suggesting Boeing executives were building kid-killing drones to pay for luxury homes in Miami, yet I think that company chairman W. James McNerney was more irate about my questioning of corporate donor strategy than he was about those questions," said Almasi. "While not addressing the core question of why Boeing chose the Clinton Foundation at a time when Secretary Clinton was involved in 'advocacy' for its company, McNerney insisted there was nothing wrong with its donations to public and private Clinton priorities. Maybe it was legal, but it stinks to high heaven."

"Mr. McNerney's response is inadequate and should concern shareholders," said Amy Ridenour, (http://www.nationalcenter.org/bios/ridenoura.html) chairman of the National Center. "He ducked the kernel of our question, which is why Boeing would make a donation to the Clinton Foundation at a time of such a conflict of interest. Even if the company's intentions were pure, such a move can raise legal questions."

"A key point here is that enforcement of laws covering honest services fraud is murky. The DC Court of Appeals has even said that determining what is and is not legal in this area is 'subtle.' So companies and individuals can be charged even when they genuinely believe themselves innocent," Ridenour said.

"Mr. McNerney's answer to the National Center focused on Secretary Clinton's actions," Ridenour continued. "I submit that is the incorrect focus. It should instead be on what his company did. A lobbyist was convicted of honest services fraud for giving travel, meal and tickets worth far less than $900,000 to public officials and is in prison now even though no public officials testified that they undertook actions because of the lobbyist's gifts. So even if Secretary Clinton were to say she would have helped Boeing even without the gifts, and even if Boeing sincerely believed it had done nothing wrong -- which was that lobbyist's contention -- the DOJ could still prosecute Boeing."

"Boeing should have been aware of all of this," added Ridenour. "During the same time period as the Boeing donations, the U.S. Supreme Court was hearing the honest services fraud case of Enron'sJeffrey Skilling. After the court ruled in that case, the Washington Post'sAmanda Becker reported (http://www.washingtonpost.com/wp-dyn/content/article/2010/08/06/AR2010080605934.html) that "uncertainty remains about the [honest services] law's meaning." Boeing announced it won the Russian contract in May 2010; (http://boeing.mediaroom.com/index.php?s=20295&item=1234) Skilling v. United States was handed down in June 2010; (http://www.oyez.org/cases/2000-2009/2009/2009_08_1394) Boeing announced its gift to the Clinton Foundation in August 2010. (http://www.prnewswire.com/news-releases/boeing-gift-to-help-reconstruct-haitis-public-education-system-100891744.html) Honest services fraud was headlining the newspapers at the very time Boeing apparently was considering a major gift to a foundation run by the husband of the sitting Secretary of State."

"Bottom line," continued Ridenour. "Companies should avoid gifts with obvious conflicts of interest to public officials, even if innocently intended. They not only open themselves up to possible legal inquiries, but they could give the public an impression of wrongdoing, even if none exists. Boeing's willingness to help rebuild Haiti is commendable, but at the time of Boeing's gift, there were many worthy charities other than the Clinton Foundation working there. In fact, Boeing had earlier contributed to Red Cross efforts in Haiti. So why donate to the one foundation led by family members of the Secretary of State at all?"

"As a side note," Ridenour concluded, "although we are happy to see American businesses succeed, we question whether the top priority of the Secretary of State in Russia or elsewhere should be drumming up business for for-profit corporations. Isn't that what the office of the U.S. trade representative (http://www.ustr.gov/about-us) is for? I thought the Secretary of State was in charge of such things as talking Russia out of invading Ukraine, not into buying airplanes."

The National Center's question for Boeing, as prepared for delivery, can be found here.

National Center Executive Director David Almasi is a Boeing shareholder.

The National Center's Free Enterprise Project is a leading free-market corporate activist program. In 2013, Free Enterprise Project representatives attended 33 shareholder meetings advancing conservative and free-market principles in the areas of health care, energy, taxes, subsidies, regulations, religious freedom, media bias, gun rights and many more important public policy issues. The National Center has participated in 12 shareholder meetings so far in 2014.

The National Center for Public Policy Research, founded in 1982, is a non-partisan, free-market, independent conservative think-tank. Ninety-four percent of its support comes from individuals, three percent from foundations, and three percent from corporations. It receives over 350,000 individual contributions a year from over 96,000 active recent contributors.

Contributions are tax-deductible and greatly appreciated.

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Source: Targeted News Service