CLASSIFIED DOCUMENT OPERATION INVOLVED CURRENT BOEING EMPLOYEES IN A … NETWORK OF SECRETS

By Christopher Hanson P-I Washington Correspondent

Thursday, March 8, 1990

Section: News, Page: A1

The activity that landed ex-Boeing analyst Richard Fowler in prison for illegal trafficking in classified Pentagon documents was part of a widespread operation involving hundreds of Boeing officials and secret libraries or repositories in at least five cities.

Although Fowler was the only Boeing employee tried and convicted for illegal trafficking, a Post-Intelligencer examination of company records and court documents, and interviews with dozens of federal investigators, government officials and former and current Boeing employees demonstrate that Fowler was not acting alone.

Previously undisclosed Boeing records show that at least 15 other executives, some still on the company payroll, did what Fowler did – obtained classified Pentagon documents and brought them to Boeing. Between 1983 and 1985 alone, other Boeing marketing executives obtained 75 secret reports, including sensitive internal memos to the chairman of the Joint Chiefs of Staff and Chief of Naval Operations, as well as reports that could have given Boeing inside information on the products of rival defense companies.

A Boeing spokesman said recently that the company has tightened its controls and that the government had found no evidence of wrongdoing either after 1985 or “by any current Boeing employee.” And while the company is still conducting an internal review, it said yesterday it had “derived some degree of assurance about the degree of … present employee involvement” from prosecutors who concluded that only Fowler should have been prosecuted.

But an examination of logs from Boeing’s Rosslyn, Va., office indicates that among those who obtained secret documents without required receipts were Washington-based executive Dennis Zeug-schmidt, who brought in nearly 30 Navy documents for which no receipts could be found in Boeing’s files; Sylvester Berdux, based in Washington, who brought in some of the Army documents on the list; Hank Tucker, also based in Washington, who brought in several Air Force documents; Mike Coleman, a Seattle-based executive who acquired at least one Air Force document; and Donald Adams, based in Ogden, Utah, who acquired five Defense Department reports.

Boeing officials argue that receipts may not have been necessary when obtaining documents, and that the company did not always retain them. But federal prosecutors and Pentagon officials said during Fowler’s trial that Defense Department receipts were in fact required and kept on file by the company.

Richard Smith, special agent with the Defense Criminal Investigative Service, a Pentagon police agency that probes allegations of criminal violations in the defense industry, acknowledged that others in Boeing besides Fowler had acquired documents without authority and that the U.S. attorney had agreed not to prosecute them in exchange for their cooperation.

In addition, government investigators say more than 300 Boeing officials were involved in the operation in other ways, including reading the documents, transporting them, giving them to other Boeing employees or acting as custodians of the documents. Among them were at least one division president and at least three division vice presidents, Boeing records show.

Company logs and other records were examined in the federal courthouse in Alexandria, Va. They were on file with other exhibits from the Fowler case.

An unspecified number of Boeing officials were named by a federal grand jury as unindicted co-conspirators in the Fowler case, but federal attorneys chose not to prosecute them. They have not been publicly identified, and Boeing said it does not know who they are.

Other Boeing document-gatherers were not prosecuted because they had cooperated with investigators and had brought in far fewer documents than Fowler, sources say. Other factors were a five-year statute of limitations, and the fact that prosecutors were less interested in other Boeing officials than more egregious violators from other defense firms. Finally, a major target of the investigation of the defense industry was employees in the Pentagon who leaked the secret documents, rather than those who received them.

“You end up immunizing people because you want their testimony to convict someone else and the statute of limitations was a very real concern in this case,” said one source close to the investigation.

Investigators say illicit document-gathering seemed to come to a halt in 1985, meaning that the statute of limitations has expired or is about to expire for others who brought in documents without authority.

Under that sort of time pressure, “you have to make tough choices” on whom to indict, said Randy Bellows, the assistant U.S. attorney who prosecuted Fowler.

However, Michael Costello, special agent in charge of the Washington, D.C., office of the Defense Criminal Investigative Service, said that because illegal trafficking did not come to a halt until September 1985, prosecutors would have until at least September of this year to indict additional violators.

Under some circumstances, he said, there would be even more time to prepare an indictment if the documents were acquired as part of a conspiracy and if other acts in furtherance of that conspiracy, such as the destruction of documents, took place later on.

One legal expert said that alleged conspirators whose last illegal act was performed more than five years ago could, in theory, still be indicted if others in the conspiracy committed illegal acts more recently – but that securing a conviction would probably be difficult.

It was almost impossible to prove that Boeing executives who used the documents knew they were acquired illegally, investigators said.

Smith and Costello said it would be illegal – conspiracy to defraud the government or conspiracy to traffic in documents – for someone to read a secret document, or transport such a document, if the user knew it had been obtained illegally. The problem, they said, was proving that knowledge.

Costello said that more than 300 Boeing employees “might have been in complicity, but this is the real world and you can’t prove it.”

And, using a drug enforcement analogy, he added: “You don’t go after the guy dealing on the street corner, you go after the supplier.”

Costello said investigators did not pursue document gatherers other than Fowler because of time constraints and because Fowler appeared to be the chief abuser at Boeing.

Smith said a problem with moving against the users of the documents was that the documents were regularly destroyed by Boeing and investigators later could not determine if the cover sheets and markings indicated that they were not releasable to contractors.

When Boeing pleaded guilty last November to two counts of accepting illegally obtained documents from Fowler, U.S. District Court Judge T.S. Ellis III questioned why other Boeing officials had not been held accountable for using classified documents.

“For a group to know they have these documents and take no action is fairly arresting,” Ellis said.

Fowler, who was incarcerated in a federal prison camp in Petersburg, Va., following his December conviction, remains bitter and convinced that he was a “fall guy.”

“Not all documents on file in Seattle were obtained by me,” said Fowler. “It was common practice for all marketing reps in Boeing throughout the country to provide this data. Yet … you won’t see a low-, medium-, or high-level official from Boeing come forward in my behalf.”

Boeing fired Fowler after the Pentagon began a full-scale probe of Boeing in 1986. He was the only Boeing employee dismissed in the affair, in which the company last November plea-bargained, pleading guilty to just two counts of accepting documents from Fowler (it actually accepted hundreds) and paying $5.2 million in fines and restitution.

As was the case with the documents illicitly obtained by Fowler, the 75 documents obtained by the other Boeing marketing executives between 1983 and 1985 did not have Defense Department receipts that prosecutors and Pentagon officials say are required to show that the release of secret documents was authorized, according to Boeing records.

The U.S. attorney’s office says any secret document authorized for release must be accompanied by a Defense Department receipt. But there were no receipts for the 75 documents in Boeing’s 1983-85 “incoming receipt” records on file with the court.

Prosecutor Bellows told Fowler’s jury the absence of receipts was a strong “indicator” secret papers had been acquired without authority because “no one who gave Mr. Fowler documents was willing to put pen to paper to acknowledge he had given him the documents.”

Fowler says forgoing receipts was a way of avoiding a paper trail that would have allowed his sources to be identified. “You are keeping that guy off of a potential hot seat,” he said.

Zeugschmidt, the Boeing marketing executive who brought in nearly 30 Navy documents for which no receipts could be found in Boeing’s files, said each document was acquired legitimately.

“Every document had a receipt and every document was linked to a contract,” meaning that Boeing had a genuine need for the information, he said. If the receipts were not in the files, they must have been misplaced, he said.

Berdux of the company’s helicopter division, who brought in some of the Army documents on the list, said if they had no accompanying receipts it meant the Army had not required receipts.

Tucker would not comment on the documents he had obtained, referring questions to the Boeing public relations office. Coleman also declined comment.

Many of the documents were internal Department of Defense memos, drafts, plans and budget projections – all of which should have been off limits to Boeing and other defense contractors, according to Pentagon and corporate sources.

“It just makes you sick,” said one veteran Pentagon official, who was shown the list of 75 documents obtained by the Boeing executives. “These are terrible.”

The Pentagon official, who has years of experience in the defense aerospace field, said Boeing definitely should not have had 54 of the 75 documents. Another 16 were questionable at best, he said.

He said internal Defense Department memos should not have been given to contractors because they could reveal the military’s hand prematurely and “could also have sensitive (weapons) performance information that may give Boeing an advantage, help it learn about competitors’ products.”

One “definite no-no,” he said, was a Jan. 28, 1985, Army “acquisition plan” for special operations helicopters. Acquired by Boeing just two days after it was written, this document could have given the company an advantage over competitors by revealing to Boeing what helicopters the Army wanted to buy.

A January 1984 Navy report comparing the Boeing E6 communications plane with the EC-130, built by Lockheed, should not have been released because it might have given Boeing inside information on a competitor’s system, he said.

And an August 1984 “Memo for Director, DARPA (Defense Advanced Research Projects Agency) – Technology Initiatives,” might have provided Boeing advance information about weapons systems on the drawing board, giving it a potential leg up in contract bidding.

“It’s almost inconceivable to me that (release of this document) could have been authorized,” said a military expert who recently left one of the highest posts in the federal government.

He said Boeing might “conceivably” have had a legitimate reason to possess some of the documents on the list, to help it carry out existing contracts, but only if a Department of Defense program manager had authorized release.

Costello, however, said that of the 75 documents, the ones relating to budget plans were clearly off limits to Boeing. “If it was an internal document, classified secret, with limited distribution, you have to assume it was not authorized for release to contractors. That would be my assumption.”

KEY EVENTS IN CASE

March 1978: Richard Fowler joins Boeing’s Rosslyn, Va., office outside Washington, D.C., after a career as a civilian Air Force budget analyst. He was hired to acquire secret budget documents, according to the U.S. attorney.

1978-1985: Fowler brings in hundreds of secret reports, which are recorded in a special Boeing log. Other executives also bring in secret documents. Defense Intelligence Agency (DIS) inspectors periodically check the log but raise no objections.

December 1985: DIS agents find several questionable budget documents in Boeing’s Huntsville, Ala., office and begin an investigation. The documents are traced to Fowler.

January 1986: After more questionable documents are found in Boeing’s Rosslyn office, the DIS suspends the office’s security clearance. Fowler declines to identify his Pentagon sources.

March 1986: Boeing tells the DIS it has tightened procedures to prevent further acquisition of unauthorized documents. But Boeing Vice President Boris Mishel argues that the company had a legitimate need for the information Fowler brought in.

April-June 1986: Security clearance of Boeing’s Rosslyn office is reinstated, but the DIS presses Boeing to persuade Fowler to reveal his sources. The DIS suspends Fowler’s security clearance.

June 16, 1986: Fowler wins Boeing Aerospace Co. “marketing employee of the quarter” award. His boss, marketing executive Paul Demetriades, sends him a letter of congratulations.

June-August 1986: Demetriades sends a letter urging Fowler to cooperate with investigators and reveal his sources. Boeing internal security investigators press Fowler to do so.

Sept. 8, 1986: Fowler is fired by Boeing. His termination letter is signed by Demetriades. Fowler’s comment on the termination papers: “It’s been a great eight and one-half years working for this fine company.”

1986-1989: Investigation of Fowler by the Defense Criminal Investigative Service (DCIS) and the U.S. attorney in Alexandria, Va.

Aug. 15, 1989: Fowler is indicted on 39 counts for illegal trafficking in secret documents.

Nov. 13, 1989: Boeing pleads guilty to two felony counts for accepting documents from Fowler, pays $5.2 million in fines and restitution. Court admonishes Boeing for failing to send a top executive to the proceeding.

Nov. 14, 1989: Air Force suspends Boeing’s Rosslyn office from bidding on government contracts. Analysts say the move is a slap on the wrist because other Boeing offices still can bid.

Nov. 16, 1989: At court’s urging, Boeing Chairman Frank Shrontz sends a letter to the court apologizing for the company’s conduct.

December 1989: Fowler is convicted after a four-day trial in U.S. District Court in Alexandria, Va. Jury deliberates only two hours. Fowler is then called before a grand jury, refuses to identify his sources, and is sent to jail for contempt of court for up to nine months.

Jan. 12, 1990: Fowler is sentenced to two years for his felony conviction.

Feb. 23, 1990: The Air Force lifts its contract bidding suspension, allowing Boeing’s Rosslyn office again to seek Pentagon business. Shrontz says the actions that had led to the suspension had occurred “in the early 1980s” and that they could not take place today because of new safeguards. He said the suspension was unwarranted.

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