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                SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C.

Litigation Release No. 14958 / June 24, 1996

Securities and Exchange Commission v. McDonnell Douglas
Corporation, 
Civil Action No. 96-1445(HHG) (D.D.C. June 24, 1996)

     The Securities and Exchange Commission announced today the
filing of an injunctive action in the United States District
Court for the District of Columbia against McDonnell Douglas
Corporation. In its Complaint, the Commission alleged that
McDonnell Douglas failed to recognize a material loss on the $6.6
billion fixed price contract between the U.S. Air Force and
Douglas Aircraft Company ("DAC"), an operating division of
McDonnell Douglas, for the C-17 Airlifter, a military cargo jet. 
As a result, McDonnell Douglas materially overstated its pre-tax
income in the financial statements that it filed with the
Commission in its 1990 annual report.  Simultaneously with the
filing of the Complaint, and without admitting or denying the
allegations, McDonnell Douglas consented to the entry of a final
judgment enjoining it from committing future violations of
Section 13(a) and Rules 13a-1 and 12b-20, periodic reporting
provisions of the Exchange Act, and ordering it to pay a civil
penalty of $500,000.

     The Complaint alleged that McDonnell Douglas knew or
reasonably should have known that it should have recognized a
loss at the end of 1990.  According to the Complaint, by June
1990, several "preliminary" estimates of the final cost to
complete the contract had been developed by DAC, ranging from
$7.133 billion to $8.640 billion, well over the $6.644 billion
ceiling on the contract at that time.  Furthermore, in August
1990, the Air Force told McDonnell Douglas that the $6.465
billion cost estimate, which the Company submitted to the Air
Force, was not supportable and that progress payments on the
contract would be withheld until McDonnell Douglas submitted an
acceptable cost estimate.  Even after McDonnell Douglas increased
its cost estimate, the Department of Defense, in November 1990,
advised McDonnell Douglas that the increased cost estimate was a
"high risk estimate and not likely to be achieved."  In fact,
during the last half of 1990, cost overruns continued to rise and
production efficiency worsened or remained flat.  Nonetheless,
McDonnell Douglas reported for year-end 1990 that it would
"break-even" on the contract.  

     Therefore, according to the Complaint, in light of
information that McDonnell Douglas possessed at year-end 1990,
the cost estimates it used in preparing its financial statements
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were not reasonably dependable and, as a result of using such
estimates and not recognizing a loss, the financial statements
were not in conformity with generally accepted accounting
principles.