Ex-Boeing Financial Chief Pleads Guilty to Felony
By TIM WEINER, NY TIMES, November 16, 2004

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ALEXANDRIA, Va., Nov. 15 - The revolving door between the Pentagon and one of its biggest contractors was described in detail on Monday when the former chief financial officer of the Boeing Company pleaded guilty to a felony conflict-of-interest charge.

The executive, Michael Sears, acknowledged that he secretly offered a job to an Air Force official, Darleen A. Druyun, (see story below) while she was overseeing billions of dollars in contracts and, by her own admission, favoring Boeing. In April, she pleaded guilty and was sentenced to nine months in prison.

A 15-page statement that Mr. Sears signed in federal court here described his Kabuki dance with Ms. Druyun. On the verge of retiring in 2002, she was secretly negotiating with Boeing and its biggest competitor, the Lockheed Martin Corporation, for a job that would pay at least $250,000 a year. Boeing had already hired Ms. Druyun's daughter, who was a go-between in contract talks between her mother and Mr. Sears.

In September 2002, Ms. Druyun used her daughter to send Mr. Sears a message. In e-mail messages, she sent word that she was "officially available" and "VERY excited" at the prospect of becoming a chief operating officer for Boeing, according to the statement signed by Mr. Sears.

Ms. Druyun, meanwhile, was trying to channel tens of billions of dollars of business to Boeing.

In October 2002, Mr. Sears and "members of the company's senior management discussed the possibility of employing Druyun," the statement said. But she was also negotiating an offer with Boeing's main rival. She had "verbally agreed to accept a position at Lockheed Martin" after talks with Robert J. Stevens, who is now the company's chief executive, the statement said.

Lockheed and Boeing had been competitors on a deal, potentially worth $23 billion, for buying or leasing refueling tanker planes. Boeing received the contract, which has been suspended, through Ms. Druyun.

Unaware that Ms. Druyun was bargaining with his chief rival, Mr. Sears met her the next day at a private conference room at the airport in Orlando, Fla. Though both knew she was still handling Boeing contracts inside the Air Force, Mr. Sears offered her a job. She told him to send an offer in writing to her home.

Mr. Sears sent an e-mail message the next day to senior Boeing executives saying he "had a 'non-meeting' yesterday" with Ms. Druyun and recommended that one of them meet with her in the near future. That meeting took place, with Ms. Druyun saying she was still leaning toward working for Lockheed.

Mr. Sears then went to the Pentagon and met Ms. Druyun in her office on Nov. 5. Mr. Sears again offered her a job; six weeks later, she took it.

The same day as the meeting at the Pentagon, she sent a letter to her Air Force colleagues saying she would disqualify herself from handling Boeing contracts in the future. But in the previous six weeks, the statement said, she and Mr. Sears had broken the rules governing the revolving door.

Those rules are clear and iron-clad.

If a government official working on a contract worth more than $100,000 is contacted by a bidder about a job, the official must report the contact and either reject the offer or disqualify himself or herself immediately. If the government official has handled a contract worth more than $10 million, he or she may not accept compensation for one year from the company that was awarded the contract.

Ms. Druyun, one of nearly 200 senior Pentagon officials who have gone to work for military contractors since 1996, broke those rules. Mr. Sears admitted in court that he helped her break them, then tried to help her cover up the facts.

Ms. Druyun and Mr. Sears are, respectively, the highest-ranking Pentagon official and military contractor to go to jail on ethics charges since the 1980's. Mr. Sears is likely to receive six months in prison when he is formally sentenced in January, his lawyer, James R. Streicker, said in court on Monday.

Boeing's general counsel, Douglas G. Bain, said on Monday that the company believes "no Boeing executive other than Mr. Sears engaged in any wrongdoing in connection with Ms. Druyun's hiring" and that "Boeing officials believed that Mr. Sears and Ms. Druyun were fully complying" with all appropriate company and Pentagon procedures during his effort to recruit her.

Boeing dismissed Ms. Druyun and Mr. Sears a year ago and its chief executive, Philip M. Condit, resigned soon afterward. Federal prosecutors say their investigation is continuing. Mr. Sears pledged in court that he would cooperate with their inquiry.

Company Information
Boeing Company (The). The Group's principal activities are to offer products and services in aerospace industry. It operates in six segments: Commercial Airplanes, Aircraft and Weapon Systems, Network Systems, Support Systems, Launch and Orbital Systems, Boeing Capital Corporation (BCC) and Other. Commercial Airplane develops, produces and markets commercial jet aircraft. The Aircraft and Weapon Systems, Network Systems, Support Systems and Launch and Orbital Systems are known as Integrated Defense Systems (IDS). IDS is into research, development, production and support of military aircraft, fighter, transport and attack aircraft, helicopters, missiles, space systems, missile defense systems, satellites and satellite launching vehicles, rocket engines, and information and management systems. The BCC finances commercial and private aircraft and commercial equipment. On 11-Feb-2003, the Group acquired Conquest Inc and on 04-May-2004, the Group acquired Frontier Systems Inc.

BOEING COMPANY (THE)
100 North Riverside Plaza 100 North Riverside Chicago ILLINOIS 60606-1596
Phone: +1 312 544-2000
Fax: +1 312 544-2082
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Long Fall for Pentagon Star
Druyun Doled Out Favors by the Millions
By Renae Merle, Washington Post, November 14, 2004

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In the macho world of the Pentagon, Darleen A. Druyun was rare: a woman who had scaled the heights of power, controlled billions of dollars in weapons programs and could punish or reward global corporations and the men who ran them.

Once the most feared woman in the world of military contracting, Druyun, 57, helped direct the Air Force's $30 billion procurement budget -- nearly three times the size of the Army's.

She was at the peak of her power as a top Air Force weapons buyer in 1999 when she scolded leaders of Lockheed Martin Corp., the world's largest defense contractor, for some of its work on satellites and rockets. Her tone was blunt: One program had "pitiful" software and a company proposal had a "crappy design." The incident contributed to the early retirement of one Lockheed executive and the company rushed to address Druyun's concerns, according to several people familiar with the situation.

But now it is Druyun who has fallen from grace. In April, she pleaded guilty to a conspiracy charge for negotiating for a job with Boeing Co. while still supervising the company's work for the Air Force. Last month she stunned military and industry leaders by admitting that she gave Boeing preferential treatment for years before taking a job with the company.

The Pentagon announced last week that because of Druyun's illegal behavior it has begun investigations into all of her contracting-related actions during her nine years as the Air Force's deputy acquisition chief. The Defense Department also began the largest review of how it buys weapons since the investigation of influence peddling in the 1980s known as Operation Ill Wind. The fallout could cost the government hundreds of millions of dollars as companies unfairly ruled out of contracts seek restitution for the costs they incurred during the bidding process.

Since she was sentenced to nine months in prison, a portrait of Druyun has emerged from court papers and interviews with her associates of a woman who acquired power beyond her status at the Air Force then walked over subordinates, humbled industry executives and sought personal advantage at government expense. Druyun is an imposing figure with a sharp -- and sometimes vulgar -- tongue, who was right at home in the male-dominated Pentagon world. Her renown as a tough government negotiator and stickler for the rules encouraged her superiors to rely on her judgment, according to industry insiders. For nearly 40 percent of her time at the Pentagon she had no supervisor at all. Her rise to power coincided with a government-wide push to build closer relationships with contractors as partners.

"I was surprised that someone who was around [during the Ill Wind investigation] would be in essence doing the same things that Ill Wind was all about," said Joseph J. Aronica, the lead prosecutor in that investigation, now a lawyer with Duane Morris LLP. "I guess these things in a way are cyclical. She may have thought no one was looking any more."

Druyun did not respond to letters and could not be reached by telephone to comment on this article. Her lawyer declined comment through his secretary.

Druyun began her career in government work in 1970 when she landed a job as an Air Force contractor negotiator at Warner Robins Air Logistics Center in Georgia. Her father, who had worked at the base for 40 years, was "instrumental" in getting her the job, according to court documents. Druyun's husband, William S. Druyun, is a retired Air Force official who was a mid-level manager at Falls Church-based General Dynamics Corp. before retiring in September.

For the next 20 years, she bounced between the Air Force, the Office of Management and Budget and NASA before being named the Air Force's deputy acquisition chief, a position she would hold until her retirement in November 2002.

But no sooner had she climbed the heights of Air Force procurement than she became involved in a controversy over work she had done three years before. She and four other Air Force officials were accused by Pentagon inspector general of improperly funneling $349 million to McDonnell Douglas Corp. in 1990 to keep the C-17 transport aircraft program on track. After a separate Air Force investigation found no wrongdoing, Defense Secretary Les Aspin dismissed one general and disciplined three others, saying the program was poorly managed. Druyun was cleared.

Gen. Merrill A. "Tony" McPeak, the Air Force chief of staff at the time, said he petitioned Aspin on Druyun's behalf. "I thought she was a strong person, giving strong leadership in the acquisition community, so if I was going to save one person I thought" it should be Druyun, said McPeak, who retired in 1994 and is now president of an aerospace consulting firm. "She was the one who would come into my office and tell me I was wrong about something. . . . She had the stomach to not be a yes-woman."

Druyun then reinvented herself as a reformer, developing "Lightning Bolt" initiatives that aimed to make Air Force weapons procurement more efficient and stressed the importance of a company's past performance in awarding new contracts. The Air Force said the program saved $20 billion.

The fortunes of defense contractors rested on Druyun's decisions on competitions, her policy decrees and her awards of bonuses. In 1999, she emerged as the Pentagon's top advocate of the F/A-22, a boon to Lockheed, the fighter jet's manufacturer. In 2001, Druyun eliminated Raytheon Co. from a $2.5 billion competition to build the small-diameter bomb, surprising industry handicappers and realigning the competitive landscape.

An official at Druyun's level would not normally decide the outcome of as many competitions as she did or get involved in the nitty-gritty of contract negotiations, according to people in the industry. Those tasks were left to underlings who made the decisions themselves or offered their recommendations. "Once in a blue moon there will be a mess where you can't resolve an issue and the issue will float up the chain of command," said John W. Douglas, the former assistant Navy secretary for research, development and acquisition.

Druyun, however, actively discouraged her staff from making recommendations, according to a former defense official who worked with her. "She began accreting this authority up to her," said the official, who spoke on the condition of anonymity because of the ongoing investigations. "She would say, 'Don't send it up with a recommendation, just send it up with information.' "

The power creep did not escape the notice of her superiors. In one or two cases, "I was surprised she was getting involved, but they were large [contracts] and . . . she was a hands-on kind of person," said Jacques Gansler, the Pentagon's acquisition chief from 1997 to 2001. "People above and around her in the Air Force should have been overseeing her."

The rough edges of Druyun's personality also emerged. Staff members who seemed unprepared or provided Druyun with inadequate or faulty information would be frozen out of later meetings, according to government and industry officials who worked with her. "Those who have feared going to see the 'Dragon Lady' only feared if they didn't have their act together, or were trying to 'cover' an error," retired Air Force Brig. Gen. Lawrence A. Mitchell said in a letter of support included in court records. "She justifiably had no time for 'BS-ers' or liars."

Gradually, Druyun's allegiances began to shift as her personal and professional lives became entangled. When her daughter's fiance, Michael McKee, was looking for a job in 2000, she contacted a longtime Boeing associate, Michael M. Sears, the company's chief financial officer, for help, according to court records. McKee was hired for a position in St. Louis. Druyun also helped her daughter, Heather, land a job at Boeing two months later -- a position created for her, the records show.

After years fostering a reputation as the defense contractors' toughest adversary, Druyun felt indebted to Boeing. She then made a series of decisions that were rooted in her sense of gratitude, she told the court.

In 2000, she agreed to increase the size of a Boeing contract for C-17 transport planes by $412 million. Two years later, she restructured the company's program to modernize 18 NATO planes used as airborne command posts, and approved a $100 million payment.

In 2001, Druyun picked Boeing over Lockheed to upgrade the avionics on C-130 transport planes. The decision stunned industry analysts because Lockheed had built the planes and was considered the most probable choice to modernize them. Industry analysts pointed to the competition as proof that Boeing's strategy to apply commercial technology to the military sector was working and that Lockheed was failing to capture the Air Force's imagination.

But Druyun soon had a new boss: Marvin R. Sambur, who managed the $1.5 billion defense business of ITT Industries Inc., was appointed Air Force acquisition chief in late 2001.

Sambur said he was surprised to learn that Druyun, not her subordinates, was deciding the outcome of competitions and contract bonuses, which often made up a company's profit margin. Druyun also hoarded information and kept the decision-making process secret, he said in an interview. He felt, Sambur said, like summer help.

"At the beginning when I came in here, a lot of people in the meetings would look to her to see if she agreed with what I had to say," Sambur said. "The recognition was . . . she's going to be here for a long time and I may be like the other acquisition people who stayed here for a relatively short period of time or didn't have the type of background necessary to run this."

Sambur said he began dismantling Druyun's power. First, he stripped her of the ability to decide competitions, then took away her authority to negotiate final contract terms or change requirements.

With her authority diminished, Druyun told Sambur that she intended to retire. Federal regulations restricted what kind of job Druyun, now the civilian equivalent of a lieutenant general, could take in the defense industry, but she soon forged a handshake agreement to join the executive ranks of Lockheed, the Pentagon's largest contractor.

Meanwhile, Druyun also met with Lockheed's largest rival, Boeing, about a job, according to court documents. She initially used her daughter Heather as intermediary. In e-mails to Sears, Heather said that her mother would consider moving out of Washington but insisted on a position with considerable responsibility.

Druyun soon reneged on her agreement with Lockheed, according to court records, and accepted a position at Boeing as a vice president. She had barely moved in when she became the center of controversy again.

In her final months at the Pentagon, Druyun was the chief negotiator of a $20 billion program to lease, then purchase, Boeing 767s converted into refueling tankers. The proposal had attracted the attention of the Senate Commerce Committee chairman, John McCain (R-Ariz.), who called the proposal a welfare program for Boeing and criticized Sambur and other Air Force officials for their handling of the deal.

Critics said it was more than a coincidence that Druyun, the chief Air Force negotiator, would take a $250,000-a-year job with Boeing. Boeing publicly defended the tanker proposal and its employment of Druyun, but also hired an outside law firm to investigate the hiring. The firm found that the employment talks had occurred while Druyun was overseeing Boeing contracts -- a violation of federal law. Druyun was fired and pleaded guilty, sparing prosecution of her daughter, who was named as an unindicted co-conspirator. Sears, who negotiated Druyun's employment, is scheduled to plead guilty on Monday.

Druyun would still not reveal the entire truth for several months -- and only then after failing two polygraph tests. After initially admitting only to a technical violation -- holding improper employment discussions -- she acknowledged years of preferential treatment of Boeing. She agreed to a higher price on the tanker deal as a "parting gift" to the firm, she told the court.

"Getting to the truth of matters can sometimes be difficult," Druyun's lawyer, John M. Dowd, told the judge before she was sentenced. "There is no denying [Darleen] made a serious mistake and there is no denying she had difficulty coming to grips with certain matters."

© 2004 The Washington Post Company

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Boeing Chiefs Knew of Insider Data, Lockheed Says
By Renae Merle, Washington Post Staff Writer, November 19, 2004; Page E01

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Citing unreleased documents, Lockheed Martin Corp. alleged in a court filing that former Air Force official Darleen A. Druyun shared with senior Boeing Co. officials proprietary Lockheed information during a 1990s rocket launch competition.

The November court filing relies on notes from a meeting Druyun attended and an e-mail from Harry C. Stonecipher, Boeing's chief executive, but details from both are redacted in the version made public. Lockheed declined to release an unedited version.

"High-level Boeing officials discussed their proposal strategy and Lockheed Martin's pricing with Ms. Druyun shortly before final EELV [rocket launch] proposal submissions," according to Lockheed's filing. "The inescapable conclusion is that the very apex of Boeing's management structure was privy to and willing to exploit the bribery scheme between Boeing and Druyun in connection with the EELV competition."

Druyun was sentenced to nine months in prison last month after admitting she showed favoritism to Chicago-based Boeing for years before accepting a job with the company. Boeing said it hasn't seen any evidence that it received preferential treatment.

Boeing dismissed the allegations, saying Lockheed had misrepresented the documents. "There is absolutely no basis to the claim that Darleen showed favoritism towards Boeing in the EELV competition," said Dan Beck, a Boeing spokesman. "We clearly prevailed over Lockheed in that original competition, both on the merits of our proposal and as the only contractor who met all Air Force requirements."

Bethesda-based Lockheed filed a lawsuit against its rival last year after Boeing acknowledged that several of its employees had Lockheed information, including its pricing for the rocket launch competition. Boeing won the 1998 competition and was awarded 19 rocket launches, with seven allocated to Lockheed.

Boeing filed a countersuit against Lockheed, contending that Lockheed is seeking through the court to discredit Boeing and gain a competitive advantage in the rocket launch market.

Lockheed also said in the filing that it wants to depose Boeing officials about Druyun's involvement in the rocket launch competition. Boeing has opposed the motion.

Boeing's space business was suspended last year from competing for contracts. Pentagon officials have said Druyun's recent admissions have made it difficult to determine when the suspension could be lifted.

© 2004 The Washington Post Company