Boeing Needs Stronger Ethics Program, Report Says

CHICAGO — Boeing Co.’s top managers have not done enough to strengthen ethics, according to an outside report released Thursday by the world’s largest aerospace firm, which is being dogged by legal and ethical headaches.

The report predated what the company said was the ethics-related firing last month of two former top executives and the resignation of Chief Executive Phil Condit. It was prepared for Boeing’s board by a team of lawyers led by former U.S. Sen. Warren B. Rudman.

The report, dated Nov. 3, is likely to have a very limited effect pending ongoing investigations of alleged Boeing contracting abuses by the Pentagon’s inspector general, congressional committees and, according to published reports, federal criminal investigators.

Still, Boeing, the Pentagon’s No. 2 supplier, had “gone to great lengths to establish, maintain and continually improve upon an ethics program that is impressive in its scope and detail,” Rudman said in a statement released by Chicago-based Boeing.

“We do not believe that any of the alleged ethics breaches involving competitors’ proprietary information represent either fundamental flaws or a systemic failure,” he added.

Boeing’s board requested the review in July after a federal investigation found two former Boeing managers stole secrets from rival Lockheed Martin Corp. in 1997 and 1998 during bidding for a rocket program.

Rudman’s report was sent to Boeing three weeks before the Nov. 24 firing of former Chief Financial Officer Michael Sears over hiring talks with Darleen Druyun, the Air Force’s No. 2 acquisition official before she was hired by Boeing in January. Sears has denied wrongdoing.

The report was released hours after the Wall Street Journal reported that federal attorneys plan to seek civil damages from Boeing to cover the cost of shifting satellite launches to Lockheed Martin, from whom the documents were stolen.

Critics dismissed the report as an effort to rehabilitate Boeing’s image. “It’s a cynical stunt,” said Keith Ashdown of Taxpayers for Common Sense, which monitors government contracting. “They badly want to change their image.”

A separate review of hiring practices spawned by the case of Druyun, who also was dismissed, is underway and will be released by the end of March, Boeing said.

Also Thursday, Boeing’s new CEO, Harry Stonecipher, met with Air Force Secretary James Roche as part of a series of meetings with Pentagon officials intended to resurrect the firm’s reputation. Earlier he met with Deputy Defense Secretary Paul D. Wolfowitz and Air Force Chief of Staff Gen. John Jumper.

Boeing shares Thursday hit a 52-week high of $41.38 before closing at $41.35, up 49 cents, on the New York Stock Exchange.