by Mark Worth
Kevin Kelly had been an electrician at the Boeing Co. for a couple of years when, in 1987, he got a call from his bosses to take on a special assignment.Work was cranking up at Boeing on two high-profile and high-budget government contracts: the B-2 Stealth Bomber and the F-22 Advanced Tactical Fighter (ATF) programs. Much of the research and development was taking place at the so-called "Oxbow" complex, a massive, closely guarded facility on the bank of the Duwamish River in South Seattle.
There was a problem, however. According to federal court records, David Sabey, whose Sabey Corp. had contracted to erect the buildings for Boeing, didn't meet the company's ultra-strict specifications. Wiring in some areas of the complex, for example, didn't meet code. In other places, safety measures were not up to snuff.
What happened next would not only change the course of Kelly's life, but also the lives of hundreds of other defense-industry workers who wound up knowing unseemly details that their employers wished never saw the light of day.
Up until now, Kelly's story has received little attention. Seattle's two daily newspapers have buried Kelly's legal battle in the back pages, but last year he commented on the case in The Seattle Times: "I've had a lot of experience, 40 to 45 years, getting people to fulfill their contracts. When I go to Boeing and say there's something wrong, they do nothing, and I'm not satisfied. When you're a whistleblower, nobody wants you. But I have to live with Kevin Kelly." (Attempts by the Free Press to reach Kelly were unsuccessful.)
Although exact figures are hard to come by, the U.S. Government Accounting Office has estimated that up to $50 billion is lost each year due to fraud in government contracts. This includes everything from crop subsidies and disaster relief, to the now-legendary $640 toilet seat billed to the government by Lockheed Corp. In 1983, Boeing billed the Pentagon $1,118 for a 26-cent stool cap. (The Air Force later admitted that Boeing had billed according to approved rates when it included labor, inspection charges, and manufacturer's overhead in the stool cap's price.)
Kevin Kelly's assignment was to go into Oxbow plant, identify the problems, and assist with what would amount to millions of dollars in repair work. What Kelly found, federal court records show, was that instead of Boeing holding Sabey responsible for the repairs, the aerospace company merely billed the work back to the government.
In the process, Sabey, whose Frederick & Nelson department-store chain was on the verge of collapse at the time, was relieved of the pesky, and expensive, chore of meeting his contractual obligations to Boeing. And, according to court records, the government shelled out at least $18 million in taxpayer money to Boeing for work that should have fallen into Sabey's lap.
When Kelly first discovered in September 1987 that Boeing was using its own workers to do the repairs and sending seven-digit invoices back to the Pentagon, red flags went up. Kelly told his superiors that Sabey's people should have been doing the work. Kelly was told not to worry about it. Time and time again, Kelly brought the problem to the attention of Boeing managers, and time and time again, he was told to mind his own business.
By the following April, seven months after he first stumbled upon the suspicious activity, Kelly's conscience kicked into overdrive. He decided he had no other choice but to blow the whistle on Boeing.
This was no trivial decision. After all, Boeing is one of the government's largest, oldest and most dependable contractors. The government's ties to Boeing are as strong as any that exist within the military-industrial complex. For starters, Boeing Chair/CEO Frank Shrontz served in the upper echelon of the Air Force for a short time in the 1980s. By exposing Boeing, Kelly would also embarrass top military brass back in Washington, D.C. This dynamic would loom prominently as later events unfolded.
Kelly's next move was to contact the two government agencies that oversaw the Stealth Bomber and ATF programs: the Defense Contract Audit Agency (DCAA) and the Air Force Office of Special Investigations (AFOSI). Because of his intimate proximity to the two programs, Kelly could get his hands on smoking-gun evidence of what he concluded were misdeeds by Boeing. Naturally, such internal records piqued the interest of government investigators. When they set eyes on the documentation Kelly had to offer, federal officials enlisted him as a "covert agent" of the government, according to court records. (Later, a federal judge took the extraordinary step of allowing Kelly to remain an active participant in the government's investigation of Boeing.)
Over the next 15 months, from April 1988 to July 1989, Kelly handed over piles of internal Boeing records that revealed how the company went about billing the government for work that Kelly believed Sabey was responsible for doing, court records show. Convinced that Boeing may indeed have been ripping off the government, the Defense Department's Office of Inspector General slapped Boeing with a subpoena in April 1989, demanding records pertaining to the top-secret Oxbow facility.
When Boeing learned of Kelly's role in aiding the government probe, he was fired. Boeing would later deny Kelly's firing was retaliatory; Kelly was fired, Boeing said, for conducting personal business (researching his allegations) on company time. In November 1989, Kelly sued Boeing under the provisions of the federal False Claims Act.
The Civil War-era law allows employees of government contractors to sue their employers if they suspect Uncle Sam is being defrauded. The law was beefed up in 1986, when Congress allowed plaintiffs to collect "bounties" - that is, a percentage of whatever the government retrieves from contractors found guilty of fraud. Kelly was one of more than 600 employees who went to court following the strengthening of what already was a potent mechanism for keeping government contractors honest.
Between 1986 and 1993, the government recovered more than $500 million through whistleblower suits. In such cases, the government has the option to become a co-plaintiff - ostensibly, if the government believes it has a good case against a shady contractor.
In this instance, it seemed like a slam-dunk decision. A DCAA audit revealed in 1989 that Boeing had submitted $18 million in invoices to the government for unauthorized work, said Philip Benson, a Newport Beach, Calif., attorney who makes up half of Kelly's legal team. "The government did a good job of accounting the charges [from Boeing]," Benson said.
After looking over the case for nearly two years, however, the Justice Department decided to opt out of the case, leaving Kelly to single-handedly take on one of the largest and most powerful corporations in the United States, if not the world. The decision, though not entirely surprising to Kelly and his lawyers, was nonetheless disappointing. To have the muscle of the Justice Department on his side certainly would have made Kelly's crusade seem more winnable.
Having won that round, Boeing and its attorneys hoped Kelly would abandon what amounted to a David-vs.-Goliath battle. Kelly, however, wasn't ready to wave the white flag. Boeing's next move was to challenge Kelly's very right to file such a suit in the first place.
Boeing, along with dozens of other defense contractors in California and throughout the country, have long been anathema to the False Claims Act. Under a provision called qui tam relator, whistleblowers effectively gain the standing of a U.S. attorney general, being granted the power to sue companies on behalf of taxpayers and the federal government. Such suits claim not that the employees are being harmed by their employers, but that employers are harming all U.S. taxpayers. As such, Boeing employs tens of thousands of potential plaintiffs who not only have the right to sue the company, but also to reap up to a 30 percent stake in whatever the government recovers.
Using both in-house attorneys and the well-heeled Seattle law firm of Perkins Coie, Boeing asked Federal District Judge Barbara Rothstein in February 1992 to toss out Kelly's case. Among the salient arguments laid out by Boeing attorneys were that: (1) Kelly shouldn't even be able to sue the company because taxpayers - not Kelly - are the people who are harmed when the government is ripped off; (2) the False Claims Act violates the separation of power provisions of the U.S. Constitution because the law allows the Judiciary to encroach on the Executive's Branch's power to prosecute; and (3) that Boeing was being denied its right to due process.
Rothstein, who is known for her independent streak, spanked Boeing's attorneys in a surprisingly harshly-worded ruling, writing that she was "unimpressed" with their arguments. Boeing appealed the ruling to the Ninth Circuit Court of Appeals. There, the case was combined with one coming out of California, where an employee of General Dynamics claimed the company had misrepresented to the U.S. Navy test results and other data pertaining to the Phalanx missile-defense system.
In September 1993, a three-judge panel at the Ninth Circuit upheld the rulings handed down by Rothstein and the judge in the General Dynamics case. Again, Boeing's legal arguments were deemed unpersuasive and "misplaced." The ruling, which sent the case back to Rothstein's court for trial, was the first of its kind upholding the rights of whistleblowers to sue their own companies, said Benson, Kelly's California attorney.
Sensing the gravity of the case, Boeing went to the U.S. Supreme Court. This got the attention of defense contractors throughout the country, 10 of whom filed friend-of-the-court briefs in support of Boeing's request for certiorari, or Supreme Court review. The high court denied Boeing's request in February, 1994. In doing so, the court gave the green light to more than 600 other whistleblowers - people working in the defense, nuclear power, health care, scientific research, and other industries - to proceed with their cases.
As for Kelly, who is now 70, his case is set to go to trial April of next year. If his allegations are proven, the maximum judgment against Boeing could reach $30 million. Regardless of the specific ruling in this case, the courts may now to be opened for other whistleblowers seeking to expose the seamy side of American corporate practices.
 |
 |
 |
 |
 |
Contents on this page were published in the April/May, 1995 edition of the Washington Free Press.
WFP, 1463 E. Republican #178, Seattle, WA -USA, 98112. -- WAfreepress@gmail.com
Copyright © 1995 WFP Collective, Inc.