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Boeing Not a ‘Public Body,’ Federal Judge Rules

Despite receiving hundreds of millions of dollars in taxpayer-backed incentives from South Carolina, aerospace giant Boeing is not a public body under the state’s whistleblower law, a federal judge has ruled.

That’s mainly because the Chicago-based company “satisfies” a condition under a 1997 S.C. Court of Appeals ruling that exempts private companies from being classified as public bodies under the whistleblower law if they provide goods or services in exchange for receiving incentives, U.S. District Judge P. Michael Duffy said in his Jan. 3 order.

“Boeing has provided, and continues to provide, jobs to an area within the State that would otherwise not have jobs,” the Charleston judge wrote. “In exchange for this service, under a negotiated agreement governed by the (state) Bond Act, Boeing has and will continue to receive payments from the State.”

Duffy also said that while Boeing “did receive a massive amount of public money,” it is not a “related organization” to the state, citing the definition of a public body as discussed in a 1991 state Supreme Court ruling in a Freedom of Information Act case.

John Woods of Charleston County, a former Boeing engineer who was fired in 2010 by the company, filed a lawsuit in September against Boeing under the state whistleblower act, which allows public employees to file lawsuits against their employers when they are retaliated against for reporting wrongdoing.

Woods was hired in 2009 to design and create repair templates for 787 Dreamliner aircraft, which are being assembled at Boeing’s North Charleston plant. He contended in court papers that he was fired from his $85,000 job after complaining to company officials about “experiencing harassment and retaliation for his insistence on adhering to appropriate quality and safety standards.”

But Duffy in his Jan. 3 order rejected Woods’ legal arguments and granted Boeing’s motion to dismiss the suit. Woods also has a separate pending lawsuit against Boeing under the federal Americans with Disabilities Act.

Woods’ attorney, Laura Waring of Charleston, told The Nerve last week that her client hasn’t decided yet whether to appeal Duffy’s ruling.  She declined further comment.

In a prepared statement last week, Boeing spokeswoman Candy Eslinger said the company was “confident that there was no merit to this lawsuit and it’s apparent from the court’s decision that they agreed.”

As for safety concerns raised in Woods’ suit, Eslinger said, “Boeing has a world-class commitment to safety and quality and takes extraordinary steps, including employing rigorous internal procedures, to ensure that the aircraft we design and manufacture are of the highest quality and are safe for the flying public.”

She added that “raising any concern at our (North Charleston) site – especially in the areas of quality and safety – is encouraged and supported.”

The Nerve first reported on Woods’ whistleblower suit in November. That story cited a letter from the Federal Aviation Administration that said the agency was investigating a separate complaint filed by Woods under the federal whistleblower law.

Contacted last week, FAA spokeswoman Kathleen Bergen would not say whether her agency was still conducting an investigation into Woods’ allegations, but instead referred The Nerve’s questions to the U.S. Occupational Safety and Health Administration and the U.S. Department of Labor. The FAA letter cited a separate investigation by the Department of Labor into Woods’ discrimination allegations.

Woods initially filed his state whistleblower lawsuit in Charleston County Circuit Court, but the case was transferred at Boeing’s request to federal court.

Critics of South Carolina’s whistleblower law say it’s weak in part because rewards for successful whistleblowers are capped at $2,000, as determined by the S.C. Budget and Control Board, even if millions of stolen or misused tax dollars are recovered.

State Sens. Jake Knotts, R-Lexington, and Vincent Sheheen, D-Kershaw, last year introduced a bill (S. 864) that would strengthen the whistleblower law. It didn’t move out of the Senate Judiciary Committee, chaired by Senate President Pro Tempore Glenn McConnell, R-Charleston and a key player in the Boeing deal, though it can be taken up this legislative session.

The current whistleblower law – specifically Section 8-27-10, which is cited as the basis of Woods’ suit – defines a public body, among other things, as a corporation “supported in whole or in part by public funds or expending public funds.”

Woods’ suit doesn’t specify how much taxpayer-supported funding Boeing has received, though The Nerve previously has estimated the public cost of the incentives over a 15-year period to be at least $500 million.

As part of a state deal to receive $270 million in taxpayer-backed bonds, plus an unspecified amount of other incentives, Boeing agreed to create at least 3,800 jobs and invest a minimum of $750 million at the North Charleston plant within seven years. The S.C. General Assembly in a rare, special session in October 2009 unanimously approved – with little prior public discussion – an incentives package for Boeing.

In court papers filed in Woods’ suit, Boeing contended that the state whistleblower law specifically exempts “nonpublic, private corporations” such as Boeing, though Duffy’s ruling last week wasn’t that sweeping.

“Interpreting the (whistleblower) Act to cover every private corporation that receives some form of public support would mean that every business that received a subsidy, grant, loan, or tax credit from the federal or state government would be a ‘public body’ under the Act and subject to whistleblower suits,” Boeing said in its motion to dismiss the suit.

In his written reply to that motion, Woods said he was asking the court to apply the whistleblower law only to those situations that “involve a block of taxpayer funds en masse or when the related organization undertakes the management or expenditure of public funds.”

“Here, Boeing has taken a block of funds en masse and has put those funds into the production of a facility it manages on behalf of its investors, not only its private shareholders, but every taxpayer in the state,” Woods wrote.

Woods said his whistleblower case would be similar to a situation involving a public school principal asking a teacher to “alter an official document related to an internal investigation of another teacher’s misconduct.”

“Likewise,” Woods wrote, “if an engineer’s supervisor asks him to alter an official document related to repair of an airplane’s fuselage, in which taxpayers have a $270 million vested interest, then that matter should be handled under the (whistleblower ) Act as well. Otherwise, taxpayers lose valuable sets of eyes on their investment.”

Woods pointed out that the state is “making a massive capital investment of taxpayer money in Boeing for both tangible and intangible benefits,” adding, “This kind of relationship is exactly what gives the public the right to know what is happening to its investment.”

Reach Brundrett at (803) 254-4411 or rick@thenerve.org.

Legislation Incentives General Assembly Economic Development Budget and Control Board Corporate Welfare Transparency

S.C. Whistleblower Act Senate President Pro Tempore Glenn McConnell U.S. District Judge Michael Duffy John Woods