Raytheon Executive Fined in $1 Billion FAA Contract Lawsuit

By Tom Schoenberg

Feb. 7 (Bloomberg) -- A Raytheon Co. executive was fined by a Washington court for failing to give opponents in a lawsuit a reprimand letter stemming from an affair with a subordinate while both worked at the Federal Aviation Administration.

Charles E. Keegan, leader of Raytheon’s Civil Aviation Solutions division, violated a court order to turn over the document showing he had an improper romantic relationship with the woman to the Washington Consulting Group Inc., Judge A. Franklin Burgess Jr. of the District of Columbia Superior Court ruled yesterday.

For the past two years, Washington Consulting Group, or WCG, has argued that the relationship began at the FAA, and continued after Keegan left for Raytheon and Maureen Knopes, now Keegan’s wife, became responsible for a contracting program to train air traffic controllers. WCG had held the contract for more than 20 years until Raytheon won it in 2008.

The Bethesda, Maryland-based company is seeking $1 billion in damages from Raytheon and Keegan, claiming the relationship contaminated the bidding process on the 10-year contract. Keegan and his wife, now Knopes-Keegan, conspired with others to reconfigure the FAA’s contracting program and stole WCG’s trade secrets to ensure Raytheon would take the business, the lawsuit claims.

‘Conflicting Evidence’

“Though it is faced with conflicting evidence as to whether Keegan’s failure to produce the reprimand letter was inadvertent or intentional, the court reaches the same conclusion in either case,” the judge said, ordering Keegan to pay a portion of legal fees to opposing counsel.

The couple’s romance was investigated by the Transportation Department’s inspector general. In 2004, a top FAA official reprimanded Keegan in a letter for having an “inappropriate relationship” that created a “perception of favoritism” and the appearance of “giving preferential treatment” to Knopes- Keegan, according to the judge’s ruling.

The letter wasn’t disclosed to WCG until Keegan was being interviewed in the case in December. Keegan said in court filings that the document was found in a box in his basement that contained work papers along with a weather dial and a runner’s bib.

“These rulings are unrelated to the merits of the case,” Jon Kasle, a spokesman for Waltham, Massachusetts-based Raytheon, said in an e-mail. “Raytheon continues to maintain that WCG’s suit is without merit,” he said, adding that the company is reviewing the rulings and will defend itself and Keegan.

‘Public Scrutiny’

Steven Thomas, a lawyer for WCG, said in an e-mail the ruling means Raytheon “now must face public scrutiny of its misconduct.”

Raytheon has twice lost bids to have the case dismissed. Last year a judge in the U.S. District Court in Washington ordered the case transferred back to Superior Court. Judge Burgess in November ruled that WCG had presented enough specific allegations to allow the lawsuit to proceed.

Since the mid-1980s, WCG and the University of Oklahoma were awarded contracts to train air traffic controllers, according to the complaint. Controllers who were hired by the FAA would attend two to four months of training in Oklahoma City before moving on to a program run by WCG that lasted two to five years.

Single Contract

In 2006, the FAA in said it was creating a single contract and looking for a company that would recruit, hire, and train controllers. The company would be required to pay the trainees for as long as three years before the FAA would hire them, according to WCG’s complaint.

Knopes-Keegan was the FAA official in charge of the initiative and became the agency’s “public face” for the new program to contractors, according to the lawsuit.

WCG alleges the proposed contracting change was “a ruse” by Raytheon, Keegan, and Knopes-Keegan to make certain that WCG couldn’t bid.

Since WCG didn’t have the resources to compete directly for the new contract, it sought to remain a participant as a subcontractor to Bethesda-based Lockheed Martin Corp., according to court records.

Once WCG was “locked in” as subcontractor, the FAA said in August 2007 that it was dropping the hiring requirement of the initiative and would merely combine the two earlier contracts into one. At that point, WCG said it was too late for the company to enter a bid as a prime contractor for business, according to its lawsuit.

Trade Secrets

WCG alleges Knopes-Keegan, who left the FAA in 2007, gave Keegan company trade secrets that were contained in WCG’s earlier bids. Keegan then used the information for Raytheon’s bid, according to the complaint.

That data, which WCG describes as an “accurate roadmap” for the bid it was presenting with Lockheed, included line-item pricing of subcontractors, instructors, and other vendors as well as staffing plans for the more than 50 facilities where it conducted controller training.

The case is Washington Consulting Group Inc. v. Raytheon Technical Services Co. LLC, 10-00296, Superior Court of the District of Columbia (Washington).

Source:  http://www.businessweek.com