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Ex-Pentagon official admits to more illegal help to Boeing

By David Bowermaster
Seattle Times aerospace reporter

Darleen Druyun went from the Pentagon to Boeing job.

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The ethical controversies that Boeing has been struggling to snuff out for the past year roared back to life yesterday when a former company executive made fresh admissions in court that while working at the Pentagon, she helped Boeing improperly secure several major Defense Department contracts.

The new revelations from former Boeing Vice President Darleen Druyun may further damage the company's chances of securing a $23 billion contract to build 100 refueling tankers for the Air Force.

They also could trigger legal and financial challenges to long-standing Boeing defense work that competitors, customers and politicians thought the company had won fair-and-square.

"Druyun's admissions touch upon so many different [Defense] programs that it now raises questions as to whether there might be a significant impact on Boeing's business," said Loren Thompson, chief operating officer of the Lexington Institute, a public-policy-research organization in Washington, D.C.

Boeing's Integrated Defense Systems (IDS) unit, which handles its Pentagon contracts, accounted for more than half of Boeing's $50.4 billion in revenue last year.

The amended plea agreement went far beyond Druyun's earlier assertions that her violations were only technical and didn't provide any benefit to Boeing.

According to federal prosecutors, Druyun "harmed the United States" while working as an Air Force acquisitions officer by improperly awarding to Boeing multiple Defense Department contracts in exchange for jobs for herself, her daughter and her son-in-law.

Special treatment Darleen Druyun admitted she gave Boeing preferential treatment on four large Pentagon contracts: 2001 to 2003 — 767 refueling tankers Druyun agreed to a higher price than she thought was appropriate and gave Boeing proprietary pricing data for a competing bid from Airbus. The deal is on hold. 2002 — NATO AWACS program Druyun negotiated a $100 million payment to Boeing that she now says was too high. She said she did so because of her own job negotiations and the Boeing jobs of her daughter and son-in-law. Boeing and the Air Force are renegotiating the deal. 2001 — C-130 modernization Druyun awarded Boeing a $4 billion contract to upgrade the avionics of more than 500 C-130 planes, even though they were built by Lockheed Martin. "An objective selection authority may not have selected Boeing," she said yesterday. 2000 — C-17 contract restructuring Druyun negotiated a $412 million increase in the contract originally awarded to Boeing. She did so while a Boeing executive was helping Druyun's future son-in-law get a job. Source: Court documents

Druyun made the admissions to U.S. District Court Judge T.S. Ellis III in Alexandria, Va., yesterday before Ellis sentenced her to serve nine months in prison and seven months in a halfway house, pay a $5,000 fine and perform 150 hours of community service.

"We are at war and your position was all the more important," Ellis said. "This case must stand as an example given the high office you held."

Boeing said it was not aware Druyun had given the company special treatment.

"The statements Ms. Druyun made in her sentencing papers came as a total surprise to The Boeing Company," the company said in a statement. "We will work with any and all government agencies that have concerns about the actions of Ms. Druyun or [Boeing]."

The Air Force said Druyun's misdeeds are not a sign of systemic problems.

"We see this as a case of an individual who engaged in personal misconduct," said Col. Dewey Ford, an Air Force spokesman. "It doesn't reflect the high levels of accountability and integrity within the Air Force acquisition community."

Boeing fired Druyun and former Chief Financial Officer Mike Sears in November 2003 when an internal investigation revealed Sears had improper job discussions with Druyun in late 2002 while she was still reviewing Boeing business for the Pentagon.

Former Boeing Chief Executive Phil Condit resigned a week later.

Suspicions about Druyun's conduct arose when Senate investigators uncovered e-mails between Druyun and Boeing that suggested she might have improperly aided Boeing's controversial proposal for the Air Force to buy and lease 100 767 aerial-refueling tankers.

According to a legal brief U.S. Attorney Paul McNulty filed yesterday, Druyun admitted handling four deals in ways that benefited Boeing:

• She "acknowledges providing to Boeing during the [tanker] negotiations what she considered to be proprietary pricing data" from European plane maker Airbus, which was competing to build the planes.

"She did this as a parting gift to Boeing and to ingratiate herself into Boeing," federal prosecutor Robert Wiechering said yesterday.

• Druyun negotiated a $100 million payment to Boeing in 2002 on behalf of the North Atlantic Treaty Organization — a payment she acknowledged to prosecutors was excessive.

• She awarded Boeing a $4 billion contract in 2001 to modernize more than 500 C-130 aircraft built by Lockheed Martin, but acknowledges to prosecutors that "an objective selection authority may not have selected Boeing."

• She negotiated a $412 million payment to Boeing in 2000 tied to its production of C-17 transports for the Air Force because a senior Boeing executive at the time was helping secure a job for her future son-in-law, Michael McKee, according to her plea agreement.

"Gratitude is generally a virtue, but in this case it definitely was not a virtue," said Kenneth Boehm, chairman of the National Legal and Policy Center. Boehm's organization outlined some of the questionable ties between Druyun; her daughter, Heather; and Boeing executives in a letter to the Defense Department inspector general a year ago.

Druyun did not divulge the new information willingly. Prosecutors said she "provided false, misleading and untruthful information" the first two times she was interviewed by investigators, and also falsified a personal journal she presented to back up her claims.

Only after failing a polygraph test did she divulge the new information in late July.

"I sincerely want to apologize to my nation, my family and friends and to the court for what I have done," Druyun told the court. "I accept full responsibility and also regret any damage I have caused to the Air Force acquisition process."

Investigations of Boeing will continue on multiple fronts.

U.S. Attorney McNulty is building a case against Sears; a court hearing to enter a plea agreement with the former CFO on Aug. 11 was canceled and has not been rescheduled.

The White House Office of Management and Budget last month also asked the Justice Department to examine the role of Air Force Secretary James Roche in the tanker negotiations.

Prosecutors likely are also pursuing improprieties related to the other contracts cited yesterday by Druyun, most notably the NATO contract.

Druyun and Boeing IDS chief executive James Albaugh negotiated a final price for the NATO contract Oct. 15, 2002, in Orlando, Fla. Sears flew to Orlando two days later to talk to Druyun about working for Boeing.

In a separate investigation unrelated to Druyun, the U.S. attorney for the Central District of California is investigating the theft of thousands of pages of proprietary documents from Lockheed Martin by two midlevel Boeing managers.

The Air Force concluded Boeing's Delta IV rocket team improperly used the documents to secure a government launch contract in 1998. In 2003, the Air Force stripped Boeing of $1 billion worth of launches and awarded them back to Lockheed.

Information from The Associated Press, Reuters and Bloomberg News is included in this report.

David Bowermaster: 206-464-2724 or dbowermaster@seattletimes.com

Copyright © 2004 The Seattle Times Company

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