But the same accounting approach, program accounting, resulted in a major hit to earnings back in the late 1990s. According to
a report by Bloomberg in 2002, Harry C. Stonecipher, then Boeing’s president and chief operating officer, warned Boeing Chairman Philip Condit in an email on Oct. 8, 1997 that was revealed in a subsequent lawsuit: “We do know for certain that there is a big surprise coming, and I think we owe the Street a heads-up. We have an unmitigated disaster on our hands and need some very candid damage control.”
Condit had just closed the deal merging McDonnell Douglas, Stonecipher’s old company, with Boeing in December 1996. On Oct. 22, 1997, Condit announced Boeing would write off $2.6 billion, the biggest charge in Boeing’s history at that time. Program accounting was also blamed for hiding the production problems that caused the write-off. In 2002, Boeing settled a private securities-fraud suit over the 1997 episode for $92.5 million. The company did not admit guilt.
At the time, according to Bloomberg’s report, the company defended itself by saying that aircraft production “is an incredibly complex and expensive endeavor” and that its managers “told the public about the 1997 production problems as soon as they were legally required to do so.” The SEC never filed charges and its accounting decisions were approved by its auditor Deloitte, the same audit firm it uses today.
In 2007, two Boeing Co. internal auditors blew the whistle to a journalist about weaknesses in Boeing’s controls over its financial reporting process. The whistleblowers warned Boeing first that it might be violating the Sarbanes-Oxley law by forcing them to say controls were in place that they believed weren’t. The whistleblowers spoke with a Seattle Post-Intelligencer reporter after deciding they were being ignored. After a story ran, Boeing investigated and fired the men for unauthorized communication with reporters. They sued, citing Sarbanes-Oxley’s whistleblower protection, and lost. Their appeals went all the way to the U.S. Supreme Court, which rejected their request for protection from retaliation for going to the news media with their complaints of alleged company wrongdoing.
https://www.marketwatch.com/story/bo...ons-2016-02-11