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Boeing dismisses 2 in ethical misconduct { November 25 2003 } Original Source Link: (May no longer be active)
http://www.nytimes.com/2003/11/25/business/25TANK.htmlhttp://www.nytimes.com/2003/11/25/business/25TANK.html
November 25, 2003
Boeing Dismisses 2 in Hiring of Official Who Left Pentagon
By LESLIE WAYNE
The Boeing Company dismissed its chief financial officer and a vice president yesterday for what it called ethical misconduct in the hiring of the vice president, a former Pentagon official who had been involved in contract negotiations with the company.
The chief financial officer, Michael Sears, was fired for discussing a job with the Pentagon official, Darleen Druyun, while she was representing the government in talks with the company over a multibillion-dollar contract to supply aerial refueling tankers.
An internal inquiry found that Mr. Sears, once considered a candidate for Boeing's top job, and Ms. Druyun, who was also fired, tried to cover up their discussions, the company said.
"Compelling evidence of this misconduct by Mr. Sears and Ms. Druyun came to light over the last two weeks," Philip M. Condit, Boeing's chairman and chief executive, said in a statement. "Upon review of the facts, our board of directors determined that immediate dismissal of both individuals for cause was the appropriate course of action." That means they will be denied severance benefits.
Boeing said that neither Mr. Sears nor Ms. Druyun, a former civilian Air Force acquisitions official, were available for comment yesterday.
Ms. Druyun, who was vice president and deputy general manager of the company's missile-defense business, is also being investigated by the Defense Department's inspector general over accusations that she gave proprietary financial data to Boeing about a competing aerial tanker bid from Airbus while she was still an Air Force official. She joined Boeing last January after having resigned from the Pentagon as a deputy assistant secretary the previous November.
Boeing's action can be seen as an indication that it wants to get ahead of any government investigation into its actions and polish an image that has already been tarnished. In July, the Air Force withheld $1 billion in rocket launching contracts from Boeing and barred it from that business for 60 to 90 days after determining that the company had illegally acquired thousands of pages of proprietary documents belonging to the rival Lockheed Martin Corporation. It was the stiffest punishment imposed on any major military contractor in decades.
The Defense Department had recently subpoenaed Boeing and asked it to produce documents in the government's investigation into Ms. Druyun, prompting the company to begin its own internal inquiry. The firing of Mr. Sears, 52, and Ms. Druyun, 56, resulted from that internal inquiry, said John Dern, a Boeing spokesman.
"The company is conceding a pattern of misconduct," said Loren Thompson, a military analyst at the Lexington Institute, a northern Virginia research group that studies the military. "There had been concerns expressed by Boeing competitors about its behavior. But no one was expecting heads this high to roll."
Boeing said that James Bell, senior vice president for finance and the corporate controller, would be the acting chief financial officer.
Richard Aboulafia, a military analyst with the Teal Group, an aerospace consulting firm in Fairfax, Va., said that it was imperative for Boeing to clean its own house, especially as it competed for more military contracts. "The danger to Boeing is that its enemies in Washington will use this and take advantage of it," he said.
Indeed, Boeing's announcement comes at a time that the $50 billion company is expanding into the military business to offset declines in commercial aviation. By next year, military contracts are expected to provide more than half the company's business, and the controversial $20 billion aerial tanker deal was considered a plum for the company.
Washington critics of Boeing — particularly those who contended the $20 billion aerial tanker contract was a sweetheart deal for the company — said its actions confirmed their earlier suspicions of an overly cozy relationship between Boeing and the Air Force during the negotiating of the aerial tanker deal. Under the deal, the Pentagon will lease 20 Boeing 767's and buy up to 80 more.
"It's politically significant," said Keith Ashdown, a military industry analyst at Taxpayers for Common Sense, a nonprofit group that was critical of the tanker deal. "It's an admission of guilt of someone who was inappropriately hired. Ms. Druyun's obligations were to get the best deal for taxpayers and national security, not to design a gold-plated parachute for her departure from public service."
Specifically, the Boeing investigation found that Mr. Sears failed to follow company procedures for the hiring of government officials.
The contacts between Boeing, based in Chicago, and Ms. Druyun were both direct and indirect. In October 2002, a month before Ms. Druyun had recused herself from working on Boeing business, she and Mr. Sears met to discuss a possible job at Boeing.
In addition, Ms. Druyun's daughter, Heather, who works at Boeing's office in St. Louis, contacted Mr. Sears in September 2002 to let him know that her mother intended to retire. Mr. Dern, the Boeing spokesman, said the company was investigating the actions of Ms. Druyun's daughter.
In its statement, Boeing said that its internal review also found that both Mr. Sears and Ms. Druyun "attempted to conceal their misconduct," but Mr. Dern declined to elaborate on this statement.
As part of its internal investigation, Mr. Dern said Boeing also looked into the sale of Ms. Druyun's four-bedroom home in the northern Virginia suburbs to a Boeing lawyer, John Judy, who was moving from St. Louis to Washington. Mr. Judy had also been working on the tanker deal, although Mr. Dern said that there was "no indication of anything inappropriate" in the sale of the house and that it was "coincidental" to the Boeing-Druyun relationship. The house was sold for $692,000, in line with house prices in the area.
It remains unclear what effect the dismissals will have on Boeing's ability to land more government contracts. Already, an aide to Senator John McCain, Republican of Arizona, who has been the most vocal critic of the Boeing tanker deal, said that he was considering asking the Air Force to hold off on carrying out the contract, whose terms are still being set, to try to renegotiate a better price for the government.
"The evidence to date suggests that this is a one-off event," said Howard Rubel, a military analyst with Soundview Technologies Group, an investment bank in Greenwich, Conn. "Someone made a mistake and it is most important for Boeing to communicate that it has zero tolerance for unethical conduct."
Still, Mr. Rubel added that the summary dismissal of these high executives "is a stunning message."
Already, the Air Force has indicated it is concerned about the pattern of behavior laid out by Boeing.
"The Air Force deplores behavior that jeopardizes the integrity of government procurement activities," It said in a statement. "Air Force leadership is very concerned with the revelation that Ms. Druyun and the chief financial officer are being dismissed from Boeing for cause." The Air Force statement said it might ask the Pentagon's inspector general to investigate contacts between Mr. Sears and Ms. Druyun as part of its existing investigation into Ms. Druyun's actions.
This is not the first time that Ms. Druyun has faced scrutiny. In late 1990, she was one of five top Air Force officials investigated by the Pentagon's inspector general for funneling millions of dollars in expedited payments to the McDonnell Douglas Corporation in an attempt to keep the company afloat. The Pentagon inspector general recommended disciplinary action against Ms. Druyun and the others, but the Air Force later challenged the inspector general's report and exonerated Ms. Druyun of any wrongdoing.
Copyright 2003 The New York Times Company
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