Judge OKs Ex-Boeing Worker’s False Claims Dismissal

Zach Winnick

Law360, Los Angeles (December 02, 2011, 9:15 PM ET) — A Washington state federal judge on Thursday granted a former Boeing Co. worker’s request to dismiss his False Claims Act suit accusing the aerospace giant of improperly converting military aircraft technology for use in its new 787 Dreamliner jet without government permission.

Thursday’s dismissal marks the second time in recent months Boeing has escaped litigation brought by Nicholas Tides, a former export compliance specialist and Sarbanes-Oxley auditor for the aircraft maker.

In October, the U.S. Supreme Court refused to consider the Ninth Circuit’s ruling in a case brought by Tides and another former employee finding that whistleblower protections of the Sarbanes-Oxley Act do not apply to employees who leak information to the news media.

Tides’ attorney John J. Tollefsen called the dismissal a “business decision” on Friday, saying his client had to determine whether to pursue the suit after government investigators looked into the allegations and elected not to join.

“I’m suspicious, but is there fire?” Tollefsen told Law360. “There’s not always fire when there’s smoke. Sometimes the fire’s gone out.”

Tides filed the False Claims Act suit in May 2010, claiming that the U.S. government paid Boeing to develop a technology for rapidly repairing composite materials on military aircraft known as Bonded Joint Application Methodology.

The qui tam suit alleged that after Boeing decided to adapt the technology to its cutting-edge Dreamliner commercial aircraft, it learned that federal contracts required it to either to obtain written approval from the government or release the technology into the public domain.

“Boeing abandoned its efforts to use BJAM in the Dreamliner lawfully and instead converted the technology into the Dreamliner program,” Tides claimed. “The conversion was covered up by removing all mention of the military from the [BJAM] database.”

Tides said he learned about the BJAM conversion while working as an export compliance specialist at the aircraft maker. He claimed management ignored his concerns about possible legal violations, creating a hostile work environment that caused him to take a job as a Sarbanes-Oxley auditor in another department.

Tides and another auditor, Matthew Neumann, were fired in December 2007 after leaking information about perceived deficiencies in Boeing’s information technology controls to the Seattle Post-Intelligencer, which wrote an investigative report on the issue.

The next year, the two sued Boeing for retaliatory discharge under the whistleblower provision of the Sarbanes-Oxley Act.

But in May, the Ninth Circuit ruled that while the Sarbanes-Oxley Act grants retaliation protection to employees who disclose evidence of employer fraud to federal and law enforcement agencies, Congress, or the employees’ supervisors, it does not protect those employees who go to the media.

In October, the U.S. Supreme Court refused to grant certiorari in their appeal of that decision, ending their retaliation fight.

In his False Claims Act suit filed last year, Tides alleged that Boeing had been submitting false claims to the U.S. government since 2003 by seeking payment on military planes when it knew it had violated its contracts by converting BJAM for commercial use without permission.

The lawsuit sought damages and civil penalties on the behalf of the United States, with Tides to share in any recovery as a relator in the qui tam action.

But Tides’ attorney Tollefsen told Law360 on Friday that his client decided to dismiss the suit after the U.S. Department of Homeland Security completed an investigation and elected not to pursue the case.

“For some reason, the government decided not to pursue it, and we don’t know if they know something we don’t know,” Tollefsen said, pointing to the possibility of unknown contract provisions and the need to conduct discovery. “We didn’t know enough to know if it was worth the investment.”

Boeing spokesman Marc Birtel said Friday that the company was pleased to have the case resolved.

Nicholas Tides is represented by John J. Tollefsen of Tollefsen Law PLLC.

The Boeing Co. and McDonnell Douglas Corp. are represented by Paul Graves and Steven Koh of Perkins Coie LLP.

The case is United States of America et al. v. The Boeing Co. et al., case number 2:10-cv-00886, in the U.S. District Court for the Western District of Washington.

–Additional reporting by Django Gold. Editing by Cara Salvatore.