Ex-CFO of Boeing May Enter Guilty Plea
Former Boeing Co. Chief Financial Officer Michael Sears is expected to plead guilty next month to illegally offering a job to a former top Air Force procurement official who favored the aerospace giant on several multibillion-dollar contracts.
But according to a source familiar with the investigation, prosecutors also are trying to get Sears to admit to something else: that his improper talks with the Air Force official tainted key Boeing defense contracts and hurt taxpayers. He has resisted making this admission.
If Sears agrees to the broader plea, it could fundamentally reshape the Pentagon’s ethics probe, spark a new round of scrutiny over several major Air Force contracts and lead to the cancellation of major Boeing projects, the source said.
A broader admission of guilt would not, however, change Sears’ potential sentence of up to six months in jail, sources said. His Chicago attorney, Theodore P. Poulos, didn’t return calls seeking comment. A Boeing spokesman declined to comment.
Sears’ plea hearing has been set for Nov. 15 in federal court in Alexandria, Va. He has been charged with one felony count for offering a $250,000-a-year job to Darleen Druyun, the Department of the Air Force’s former principal deputy assistant secretary for acquisition.
The scandal mushroomed this month with Druyun’s surprise admission that she had helped Boeing obtain favorable terms on at least four major Pentagon contracts because the company had given jobs to her daughter and future son-in-law. Druyun herself was hired by the company later.
Several legal experts outside the case believe the timing of Sears’ plea agreement is part of a government strategy to move aggressively on its investigation soon after the presidential election. A host of federal agencies has been scrutinizing Druyun’s dealings with Boeing, including the FBI, the Defense Criminal Investigative Service and the Air Force’s inspector general.
Druyun acknowledged that she picked Boeing over four competitors on a $4-billion contract to upgrade the cockpit electronics of C-130 Hercules cargo planes under “indebtedness” for hiring her family. She also arranged to pay Boeing $100 million more than what she believed was warranted to restructure an early-warning radar plane deal for NATO.
In addition, she agreed to pay Boeing $412 million to settle a contract dispute over the production of C-17 Globemaster III transport planes. And in the most high-profile deal of all -- to acquire 100 Boeing 767s for $23 billion for use as aerial refueling tankers -- Druyun admitted to agreeing to pay a higher price for the aircraft than she believed “was appropriate.”
Now, people close to the matter say, the inquiry may broaden beyond the Air Force to include Army and Navy contracts awarded to Boeing in recent years. Among them: a $14.5-billion pact to lead development of Future Combat Systems, a host of new weapons and technologies for the Army. Much of the work on this project is being performed at Boeing’s Huntington Beach unit.
Boeing, based in Chicago, is the largest private employer in Southern California with about 36,000 workers.
“Rightly or wrongly, the Druyun revelations have cast a pall of doubt over Boeing’s many program wins,” said Loren Thompson, defense policy analyst for the Lexington Institute, an Arlington, Va., think tank. Late last year, Boeing fired Sears and Druyun when the scandal broke. Soon after, Boeing Chief Executive Phil Condit resigned.
James McAleese, a Washington attorney who specializes in defense contracts, said that any additional information uncovered from Druyun and Sears could be used to impanel an “investigative” grand jury.
“As a practical matter, the other shoe cannot drop unless another person agrees to plead guilty,” McAleese said of Sears. “You can’t go after Boeing until one of its senior officials is convicted or pleads guilty.”
Boeing executives have said they were surprised by Druyun’s admission about steering contracts the company’s way. They have maintained that they were aware only of her improper hiring, and only after the fact.
The fallout from the Pentagon probe already has proved far-reaching. Two weeks ago, Congress derailed the deal for aerial refueling tankers. Druyun, the initial Air Force negotiator on the transaction, acknowledged passing along to Boeing proprietary pricing information from rival Airbus, which is 80%-owned by European Aeronautic Defense & Space Co.
Lockheed Martin Corp. and BAE North America, two of the nation’s largest defense contractors, have asked the Pentagon to overturn several other contracts that Boeing won, including the $4-billion accord to upgrade C-130 cockpits. Sources said the companies were considering filing a civil lawsuit against Boeing.
The Pentagon could also suspend or bar Boeing from seeking specific contracts. Last year, Defense Department officials indefinitely suspended Boeing from bidding on rocket work potentially worth billions of dollars after two former employees were charged with stealing trade secrets from Lockheed.
But Thompson said such penalties were likely to be limited because the industry has become so small. “The Pentagon really can’t cut Boeing out of the contracting process,” he said. “There are only five major defense contractors in the business.”
