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Jeff Stachewicz says he and his company have been called everything from information whores to information spooks. And he likes that. After all, Stachewicz is in the business of corporate espionage. He and his small team of lawyers and analysts don’t break into offices or computer systems. They don’t pay informants either. They receive the data from an unlikely source — the federal government. One of their recent targets is the Boeing Co. Using the Freedom of Information Act, Stachewicz’s FOIA Group Inc. requested all data involving Boeing’s $581 million contract with the Air Force for global positioning system satellites. Over Boeing’s objections, the Air Force agreed to give it the information, including detailed line item pricing schemes and labor rate data. Boeing has turned to the courts to prevent the information from becoming public. On Feb. 23, Boeing filed suit in the U.S. District Court for the District of Columbia, claiming that the data being sought by the FOIA Group are trade secrets that would give their competitors an unfair advantage if made public. Weeks earlier, Boeing filed a similar action against the Air Force to prevent the disclosure of contract information sought by archrival Lockheed Martin. Boeing is not alone. Over the past decade several large companies such as MCI WorldCom Inc., Boeing subsidiary McDonnell Douglas, and the General Electric Co. have sued the government to prevent federal agencies from releasing such data. Using FOIA to peek at a competitor’s books has become commonplace among contractors looking to deal with the government. “All companies need competitive intelligence,” says Stachewicz, a former FOIA lawyer with the Army who founded the FOIA Group in 1988. “All information has value. Information gives you some type of advantage in the arena you’re dealing in.” The Freedom of Information Act is traditionally thought of as an instrument used by reporters and the public to obtain information on how the federal government operates and how tax money is spent. But during the past 20 years, a cottage industry has arisen that uses the law to spy on companies doing business with the government and then sells the intelligence to competing contractors. Some of the information being sought includes detailed pricing information, hourly labor rates, profit margins, and more recently, performance evaluations. Typically, the FOIA request is not made by the competing company, but by an intermediary such as the FOIA Group, which pledges client anonymity. Since 1988, federal agencies have been required to notify contractors when “confidential commercial information” is sought and give them an opportunity to weigh in on whether it can be released. Stachewicz says he was seeking the Boeing information on behalf of “a major player” that he declines to name. Elizabeth Steponkus, a senior intelligence specialist at Federal Sources Inc., another FOIA-using group that is also seeking the Boeing material, says her company maintains a database of contracting information that paid subscribers can view. “Once a contract is awarded, we’ll submit a FOIA request to obtain a copy of the awarded contract,” Steponkus says. “Once I get the contract, I’ll scan it into the Web site.” But large companies like Boeing will do all they can to prevent such disclosures. And if they cannot persuade the government to keep the information confidential, they’ll go to the courts and file what is known as a reverse FOIA action. Government contract lawyers say government agencies will agree to release detailed pricing data and that the Justice Department is willing to fight for the release in court. The motivation, they say, is to foster competition among contractors in order to secure better deals for the government. James McCullough, who heads the government contracts practice at the D.C. office of Fried, Frank, Harris, Shriver & Jacobson, says specific pricing information, such as costs offered to the government if it wants to extend the contract, can hurt a company if it winds up in the hands of competitors. “Competitors can come up with proposals to get the job done cheaper,” says McCullough, who routinely represents companies seeking to prevent the disclosure of pricing information. “The fear is that competitors will underbid them.” In fact, it was that type of information obtained from Lockheed that got Boeing in trouble with the federal government two years ago. In that matter, Boeing officials received pricing information from a former Lockheed employee that was used by Boeing to win a 1998 contract with the Air Force. A subsequent criminal investigation led to criminal charges against three former Boeing officials. The government also pulled $1 billion in contracts from Boeing. Lockheed is now suing Boeing in a Florida federal court over the affair. Thomas Wheeler, a partner at the D.C. office of DLA Piper Rudnick Gray Cary who successfully litigated a reverse FOIA case on behalf of MCI, says such information — sometimes more than 10,000 pages of detailed cost breakdowns — can also be used by competitors as a road map to exploit a company’s weaknesses in certain markets. “They’ll find out where they are most vulnerable and then go after them in those geographic areas,” Wheeler says. JOCKEYING FOR POSITION In October 2003, Boeing won a contract to upgrade six satellites for the Air Force that would expand the government’s global positioning system. Boeing was first picked in 1997 for the satellite contract, which has been modified several times since then. The 2003 contract was worth nearly $600 million. Almost immediately after the October 2003 contract was awarded to Boeing, the FOIA Group and Federal Sources filed requests seeking copies of the entire contract file — including information from the first application bid to the final award — from the Air Force Space and Missile Systems Center in Los Angeles, according to Boeing’s civil complaint. In early 2004, the Air Force notified Boeing of the requests and offered the company a chance to comment. Over the next several months, Boeing and the Air Force negotiated over the information. Boeing objected to the release of all hour, cost, and fee data for years 2000 to 2004 and other pricing data contained in the contract. In January 2005, the Air Force notified Boeing that it did not agree with its objections and was planning to release the data. Boeing sued to block the disclosures the following month. Boeing filed a separate suit in protest of a 2003 FOIA request by Lockheed. Boeing’s competitor sought criteria compiled by the Air Force in a $5 million contract awarded to the Northrop Grumman Corp. Boeing had put in a bid for the contract, but was not selected. The Air Force notified Boeing that some of the information contained in the materials sought by Lockheed were data submitted by Boeing during the bidding process. Boeing argued against their release, claiming that the section contained labor costs, rates, financial strategies, and its past performance under Air Force contracts. In January, the Air Force notified Boeing that it planned to release the documents involving Boeing in full except for three limited exceptions. Boeing filed suit on Jan. 24. Richard Oehler of the Seattle office of Perkins Coie, who represents Boeing in both cases, referred calls to Boeing. Doug Kennett, a spokesman for Boeing, declines comment. In a written statement to Legal Times, the Air Force Space & Missile Systems Center contends that the decision to release the data on Boeing was based on its interpretation of legal standards governing FOIA. The information sought by the FOIA Group has been previously disclosed on six different occasions, according to the statement. Also, the Air Force “has released pricing information submitted by other similarly situated contractors under identical circumstances.” Federal trial and appellate courts across the country are split on whether certain pricing information should be released. In one recent case, a federal appellate judge in the District pointed out that the Justice Department has never litigated the fundamental question of whether prices charged to the government for specific goods could be confidential commercial information or trade secrets under FOIA or the Trade Secrets Act. Instead, most cases turn on whether the company whose data is at stake can show that releasing the information would cause substantial harm. In the District, where most reverse FOIA actions are filed, the U.S. Court of Appeals for the D.C. Circuit has twice ruled that detailed price information should stay confidential. In one opinion from 1999, Judge Laurence Silberman wrote that the government failed to claim any legal authority for releasing line item pricing information involved in McDonnell Douglas’ contract with NASA: “If commercial or financial information is likely to cause substantial harm to the person who supplied it, that is the end of the matter, for the disclosure would violate the Trade Secrets Act.” In a second decision — rendered in 2004 and also involving McDonnell Douglas — Lockheed Martin had sought the contract McDonnell Douglas entered into with the Air Force for servicing aircraft. The contract included pricing options for an additional eight years should the government want to renew the contract. The Justice Department argued that releasing the information would not cause substantial harm to McDonnell Douglas because there was no way for rivals to completely or accurately replicate McDonnell Douglas’ business judgment and risk assessment. In a 2-1 decision issued in July 2004, the appellate court disagreed, finding that releasing pricing options for future years would give Lockheed and other potential competitors the chance to underbid McDonnell Douglas. “We recoil, as does McDonnell Douglas, from the implication of this argument, namely, a per se rule … that all constituent information — as opposed to the bid itself — is to be disclosed,” Chief Judge Douglas Ginsberg wrote for the majority. In a dissent, Judge Merrick Garland questioned why the DOJ had yet to litigate the central issue of whether FOIA or the Trade Secrets Act would apply to such information. Stachewicz of the FOIA Group says the continuing litigation between companies and the government over information he’s chasing doesn’t concern him. Stachewicz, who says his company files close to 10,000 FOIA requests a year with federal, state, and local governments, says there hasn’t been a single definitive ruling preventing the release of such information and “as long as it stays that way, we can maneuver within the system.” But once a FOIA request gets to litigation — with the Justice Department defending its decision to release information — Stachewicz says he likes to stay out of it because he never knows when a target of his information requests may become a client. “A lot of clients come to us after they see how aggressive we are going after their information,” Stachewicz says, “and they say, ‘Hey, we want you to work for us.’”

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