Report May Lift Clouds Over Boeing
A Pentagon task force probing defense contracts that may have been tainted by a former Air Force official imprisoned for favoring Boeing Co. has concluded that there were some “anomalies” but won’t call for a criminal investigation, government sources said.
The special panel will present its findings today to congressional staffers and say that it found no additional wrongdoing, although it will ask the Pentagon’s inspector general to review certain contracts, the sources said.
This and several other developments could provide a significant boost to Chicago-based Boeing’s efforts to resolve government investigations over a series of ethics scandals that have rocked the aerospace giant.
Later this week, the Government Accountability Office is likely to agree with Boeing that two military contracts now under protest were awarded properly. On Friday, when former Boeing Chief Financial Officer Michael Sears is scheduled to be sentenced for illegally hiring the former Air Force procurement official, he isn’t expected to implicate any other Boeing executives, according to people familiar with the case.
Meanwhile, two separate federal criminal investigations into Boeing in Virginia and Los Angeles are winding down and no additional indictments are expected, government and industry sources said.
“It appears what we had here was a fairly straightforward two-person conspiracy,” said Loren Thompson, a defense analyst for the Lexington Institute with close ties to Pentagon investigators. “There were no wider ramifications.”
Last fall, former top Department of the Air Force acquisition official Darleen Druyun pleaded guilty to seeking a Boeing job while negotiating a $23-billion Pentagon deal to buy aerial refueling tankers from the company. Druyun is serving a nine-month federal prison term. She admitted in court that she favored Boeing on several other multibillion-dollar deals because the company gave her daughter and son-in-law jobs.
Her admission led to a detailed review of her nine-year tenure as a key weapons buyer for the Pentagon and prompted rival defense companies to file protests over Boeing contracts awarded during that period.
But the GAO is expected to reject claims by Lockheed Martin Corp. that a $2.5-billion contract to develop small-diameter bombs was improperly awarded to Boeing, government sources said. The GAO could also reject a second Lockheed protest of a $4-billion Boeing award to upgrade cockpit avionics on C-130 Hercules transport planes, sources said.
Druyun was the ultimate decision maker on the C-130 deal and was partly responsible for drafting the initial terms of the bomb contract. Last year she told prosecutors that “an objective selection authority may not have selected Boeing” over three other bids for the C-130 contract.
In a separate review, Air Force officials acknowledged last week that similar protests by Lockheed over two classified contracts won by Boeing were rejected last month. Had Boeing lost any of these contract reviews, it would have faced significant fines or the possibility of having to re-bid for the work.
As for Sears, he is to be sentenced to up to six months for improperly offering Druyun a job in 2002 while she was negotiating with Boeing on the tanker deal. Boeing hired Druyun for a $250,000-a-year position shortly afterward. About a year later the company fired Druyun and Sears after an internal probe uncovered their improper job talks.
Another remaining problem for Boeing is a corporate espionage case involving Lockheed during a high-stakes, multibillion-dollar competition for a new Air Force rocket. Federal prosecutors have accused two former Boeing mid-level managers of stealing proprietary Lockheed rocket documents during the bidding process. As a result, 18 months ago the Air Force suspended Boeing from seeking additional rocket work and took away rocket launch contracts valued at nearly $1 billion.
But a criminal probe in Los Angeles in the Boeing-Lockheed rocket case is nearing a close and hasn’t led to additional indictments, sources said. And after Sears is sentenced, the Air Force is likely to lift the rocket suspension to allow Boeing to compete for a new batch of rocket launch orders, government sources said.
Boeing has maintained that the document pilfering from Lockheed was the work of rogue employees.
The Sears sentencing and the latest developments in the government’s review of Druyun-era contracts could mark a breakthrough for Boeing. The company has maintained that the ethical improprieties were confined to Sears and Druyun.
A week ago Boeing Chief Executive Harry Stonecipher told Wall Street analysts that he believed the investigations “now are all completed.” By the end of this month, he said, Boeing will “be able to move forward in settling a bunch of these issues.”
Stonecipher also said the company was willing to pay financial penalties if necessary: “If we have contracts that are tainted, we are going to cure them. If we owe you money, we’re going to pay.”
Keith Ashdown, vice president of policy for the nonpartisan Taxpayers for Common Sense, said he wasn’t convinced that Boeing’s ethics scandals were nearing the end. “The watchdog in me thinks there is something more there, but we need more proof.”
