According to the Company’s FORM 10-Q for the quarterly period ended June 30, 2002, on October 31, 1997, a federal securities lawsuit was filed against the Company in the U.S. District Court for the Western District of Washington, in Seattle. The lawsuit named as defendants the Company and three of its then executive officers. Additional lawsuits of a similar nature were filed in the same court and were consolidated. The lawsuits generally alleged that the defendants desired to keep the Company's share price as high as possible in order to ensure that the McDonnell Douglas shareholders would approve the merger of Boeing and McDonnell Douglas and, in the case of the individual defendants, to benefit directly from the sale of Boeing stock. The Court certified two subclasses of plaintiffs in the action. The plaintiffs sought compensatory damages and treble damages. On September 17, 2001, the Company reached agreement with class counsel to settle the lawsuit for $92.5 million. The settlement, which will have no effect on the Company's earnings, cash flow or financial position, as it is within insurance limits, was approved by the Court in February 2002.
The original Complaint charges Boeing and a number of senior officers and directors with making a series of material misrepresentations and omissions regarding the Company's problems arising from a ramp-up of production output, including substantial late delivery penalties and other undisclosed costs. Plaintiff alleges that, in omitting and misrepresenting these material facts, the Defendants intended to artificially inflate the Company's share price during the Class Period, in order to facilitate a successful and beneficial conclusion to merger discussions with McDonnell Douglas. The Complaint further charges that the Company's Chairman and CEO, and the Company's Chief Financial Officer, engaged in massive insider selling during the Class Period, during which they sold thousands of shares at artificially inflated prices, for total proceeds of over $2 million. On October 22, 1997, Boeing revealed that it would report a loss for the third quarter of 1997, due to late delivery costs and other expenses associated with the Company's production difficulties, which would total approximately $1.6 billion during the quarter, and another $1 billion afterwards. This shocking disclosure prompted a $4 fall in Boeing's share price on October 22, 1997.