Trade Secret/Economic Espionage Cases
June 25, 2003
U.S. Department of Justice
United States Attorney
Debra W. Yang
Central District of California
Contact: Christopher Johnson
Assistant United State Attorney
Assistant United States Attorney
Public Affairs Officer
Two Former Boeing Managers Charged in Plot to Steal Trade Secrets from Lockheed Martin
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 Boeing’s 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 Boeing’s 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 Erskine’s 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 Erskine’s and Branch’s 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 Martin’s documents recovered from Branch’s and Erskine’s 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 Martin’s 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 competitor’s 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
Assistant United States Attorney Christine Adams
(213) 894-8692 Release No. 03-95