IT Whistleblower Hits Boeing With Retaliation Suit

A former Boeing Co. internal auditor who alleges that he was fired for speaking to the press about data security flaws has sued the company for wrongful termination.

Nicholas P. Tides sued the Chicago-based aerospace company on Friday in the U.S. District Court for the Western District of Washington, alleging that Boeing fired him after he gave information to the Seattle Post-Intelligencer about purported information technology flaws.

The newspaper used information from Tides and other auditors on a confidential basis to publish an investigative report detailing Boeing's failures to shore up its computer networking and software systems, leaving the company vulnerable to fraud and theft, according to Tides' attorney, John J. Tollefsen.

The termination was illegal under the whistleblower provision of the Sarbanes-Oxley Act of 2002, the complaint said.

"The auditors firmly believe they were just trying to do their job and help Boeing," said Tollefsen, of Tollefsen Law PLLC.

Boeing failed internal Sarbanes-Oxley audits for three fiscal years from 2004 to 2006 because of ineffective controls for its IT systems, the complaint said.

The company faced the possibility of having to report its data security issues publicly if it failed to meet the Sarbanes-Oxley audit standards for a fourth consecutive year, the complaint said.

"As a consequence, Boeing was likely to suffer catastrophic negative financial impact because material weaknesses in IT controls affect the perceived integrity of Boeing's financial statements," the complaint said.

To avoid that, the company hired PriceWaterhouseCoopers to supervise the auditors, according to the complaint.

But PriceWaterhouseCoopers designed internal controls to ensure that Boeing would pass the audit – regardless of whether the auditors agreed that the data security systems had been improved, the complaint said.

PriceWaterhouseCoopers "cooperated with Boeing's intentional misclassification" by counting some items as "passed" without testing them, according to the suit.

As a result of those actions and other alleged misrepresentations, Boeing passed its 2007 internal audit, the complaint said.

A Boeing spokesman said the company has "not had the chance to review the details of the suit" and declined to comment.

The Seattle P-I reported extensively on Boeing's failures to pass the three previous internal audits, saying the company had serious problems protecting its data systems from fraud and ensuring the accuracy of financial statements.

Two former employees received prison sentences in 2006 for taking advantage of a security flaw and stealing nearly $300,000 from the company, the newspaper reported.

The aerospace giant also often had to spend weeks laboriously rechecking financial data because of notorious deficiencies in the company's data systems, according to the Seattle P-I.

Boeing told the P-I that it is "confident in the integrity of the company's overall control environment and in the accuracy of our financial statements" as reviewed by internal and external auditors.

The Sarbanes-Oxley Act of 2002, passed in the wake of accounting scandals at companies such as Enron and WorldCom, requires that companies report any deficiencies in internal data controls that might affect financial results.

Considering that Boeing serves as a defense contractor, the aerospace company's IT problems could have ramifications for national security, Tollefsen said.

That made it even more important for internal auditors, such as Tides, to act as whistle blowers and come forward with information about the security flaws, he said.

"This is very critical," Tollefsen said. "You've got military secrets in this computers. If they're breached, you even have the nation's secrets available."

The case is Tides v. Boeing Co., case number 2:08-cv-0161-JCC in the U.S. District Court for the Western District of Washington.

The plaintiff is represented by the Tollefsen Law PLLC.

Christie Smythe, Reporter

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