Top Execs at Boeing Criticized in Probe

Boeing Co.’s highest executives appear to have treated illegal efforts to hire a U.S. Air Force weapons buyer as “business as usual,� the government said in court papers made available Thursday.

The critique by a U.S. attorney could set the stage for further federal investigation of the upper management of Chicago-based Boeing and boost the cost of any settlement for an episode the government said had inflicted “significant harm� on the Air Force and Defense Department.

It could also hurt Boeing’s hopes to restore quickly an image stained by ethical lapses in dealings with the Pentagon, its biggest client, and prolong a suspension from new Air Force rocket launch business imposed in July 2003 for possessing rival Lockheed Martin Corp.’s trade secrets.

U.S. Atty. Paul McNulty criticized the management in a memorandum for the sentencing today of former Boeing Chief Financial Officer Michael Sears, who has pleaded guilty to aiding and abetting a conflict-of-interest law violation by Darleen Druyun, the Air Force’s ex-No. 2 weapons buyer.

Druyun was sentenced to nine months in federal prison Oct. 1 after admitting she had improperly steered billions of dollars in contracts to Boeing before joining the company as a $250,000-a-year vice president.

Sears met Druyun secretly in Orlando, Fla., on Oct. 17, 2002. Sears, 57, reported the next day on what he called the “non-meeting� to the three other members of a newly created Office of the Chairman and to James Albaugh, president of Boeing’s Integrated Defense Systems business unit.

In an e-mail, Sears discussed a possible $50,000 signing bonus but did not mention by name Druyun, who was still negotiating a $20-billion-plus plan to lease and buy 100 Boeing 767s that would be converted into aerial refueling tankers.

“The senior management of Boeing did not confront the obvious legal and ethical issues presented by these employment negotiations,� wrote McNulty, U.S. attorney for the Eastern District of Virginia, where Sears is to be sentenced.

“Rather than reacting with concern to a questionable ‘non-meeting’ with a senior government official these Boeing executives appear to have accepted the negotiations as business as usual,� he said.

Dan Beck, a Boeing spokesman, replied: “Those few senior Boeing officials who knew Sears was hiring Druyun also believed that the two longtime veterans of the aerospace and defense industry were following the appropriate laws and processes.�

Boeing fired Sears and Druyun in November 2003. Chairman and Chief Executive Phil Condit resigned a week later.