Boeing Dismisses 2 Executives for Misconduct
By KENNETH N. GILPIN
Published: November 24, 2003
The Boeing Company said this morning that it had fired its chief financial officer and another executive, a former official with the United States Air Force, for unethical conduct surrounding her hiring.
Boeing said that an internal investigation revealed that the two executives ï¿½ Michael Sears, the executive vice president and chief financial officer, and Darleen A. Druyun, a vice president and deputy general manager for missile defense systems at Boeing ï¿½ had tried to cover up their misconduct.
Ms. Druyun, who joined Boeing in January, had a long career with the Air Force. When she left the Pentagon, she was serving as principal deputy assistant secretary for acquisition and management,overseeing the management of Air Force acquisition programs.
This fall, the Pentagon began an investigation into allegations that Ms. Druyon acted improperly in giving Boeing financial information about a competing bid on a $21 billion leasing contract for refueling tankers. Documents disclosed by the government showed that Ms. Druyun had told Boeing that a rival, Airbus Industrie, had submitted a bid that was $5 million to $17 million less per plane than Boeing's offer.
Boeing won the business, and the deal, which is part of the $401.3 billion defense bill that President Bush signed today, was agreed to in May.
The legislation provides for the lease of 20 Boeing 767 aircraft, said Cai von Rumohr, a defense industry analyst at S.G. Cowan Securities. There is a provision that would allow the Pentagon to buy 80 aircraft. That portion of the proposal is not funded, he said.
This morning, John Dern, a Boeing spokesman, said Ms. Druyun "disqualified or recused herself" from Boeing business dealings on Nov. 5, 2002. He said her dismissal had nothing to do with the tanker contract.
"Our investigation revealed no linkage to the tanker program," he said. "The company did not derive any benefit as a result of this inappropriate contact."
Two weeks before that date, Ms. Druyun had a meeting with Mr. Sears about coming to work with Boeing, Mr. Dern said.
In a statement, Boeing said that Mr. Sears "was dismissed for violating company policies by communicating directly and indirectly with Druyun about future employment when she had not disqualified herself from acting in her official government capacity on matters involving Boeing."
The indirect contact the company referred to involves contacts that Ms. Druyun's daughter, who works in the company's integrated defense systems business, had with Mr. Sears in September of last year about her mother and her career plans.
The daughter's name is being withheld, Mr. Dern said. The investigation at Boeing is continuing, he added.
Boeing began its investigation in July.
Phil Condit, Boeing's chairman and chief executive, said in a statement that "compelling evidence" of the misconduct came to light in the last two weeks.
"Upon review of the facts our board of directors determined that immediate dismissal of both individuals for cause was the appropriate course of action," Mr. Condit said in the statement.
Mr. Sears, who is 56, had worked at Boeing since 1969.
Separately, Boeing said it had named James Bell, currently senior vice president for finance and corporate controller, as acting chief financial officer.
This is not the first time the way Boeing conducts its defense business has come under criticism.
In July, the Air Force hit Boeing with the stiffest penalty imposed on any major contractor in decades when it took away $1 billion in government rocket business. The Air Force had determined that Boeing illegally acquired reams of proprietary documents from a rival, Lockheed Martin Corporation.
Boeing says that over the past several months it has made an effort to enhance its programs and policies to ensure an understanding by employees that ethical breaches will not be tolerated. Earlier this month the company created an Office of Internal Governance, and it retained former Senator Warren Rudman to review the company's ethics programs.
"The board and I have asked Senator Rudman to extend his review and examine Boeing's procedures and practices on hiring government employees to ensure this type of incident never happens again," Mr. Condit said in the Boeing statement.
Boeing said it had informed the Air Force of its actions and would continue to cooperate with the government in its investigation.
"It is not possible to predict at this time what actions the government might take against the individuals and the consequences of those actions," the Boeing statement concluded.
On the New York Stock Exchange, Boeing's shares were offered at $38.37, down 49 cents, in early afternoon trading. (Boeing's symbol is BA).
The Seattle Times reports that Sears was just about to have a book published.
Sears denies any wrongdoing.
'Hatchet Harry' to take over boeing:
Stonecipher takes reins at Boeing - finally
Reuters, 12.01.03, 5:52 PM ET
By Chris Stetkiewicz
SEATTLE (Reuters) - A year after he joined Boeing Co. in a 1997 merger with McDonnell Douglas, Harry Stonecipher gave a typically blunt reply to a question about rumors he was supplanting Boeing Chief Executive Phil Condit.
"You better get yourself a new grapevine. The one you have is seriously flawed and useless. It is wrong on all counts," Stonecipher told Reuters in an e-mail a year after Boeing bought McDonnell Douglas for $16 billion.
As it turns out, only the timing was off -- Boeing Monday announced that Stonecipher would succeed Condit, who resigned amid a wave of corporate scandals, missteps and plain old bad luck.
The change couldn't be more dramatic. The soft-spoken, intellectual Condit gives way to a man dubbed "Hatchet Harry" by critics of his aggressive management style.
"Mr. Stonecipher's appointment will certainly be greeted with some trepidation in the workplace," said Bill Dugovich, spokesman for Boeing's main engineers union, the Society of Professional Engineering Employees in Aerospace, which blamed Stonecipher's hard-line stance for sparking a 40-day strike in 2000.
Stonecipher's rise to the top caps six years of gradual inroads into Boeing's executive ranks by former officials at McDonnell Douglas, where Stonecipher was chief executive.
"It is now a totally different company with totally different motivations," said one former Boeing executive. "Condit didn't get on top of it. He never really ran the company."
In 1997 McDonnell Douglas' commercial jet sales were drying up and after losing a chance at a $200 billion Joint Strike Fighter contract with the Pentagon, the company agreed to be acquired by Boeing.
Stonecipher served as Condit's right-hand man until retiring at age 66 in June 2002.
Former Boeing Chief Financial Officer Michael Sears, a McDonnell Douglas holdover, was the odds-on favorite to succeed Condit until Sears was fired last week in an ethics scandal.
Condit had named Sears and two other McDonnell Douglas veterans to join him in a four-person chairman's office in March 2002, three months before Stonecipher's retirement.
In a sharp break from Condit's collegial style, Stonecipher said on Monday he would dissolve the chairman's team, indicating he will not be sharing power.
New Boeing Chairman Lewis Platt is serving in a "nonexecutive" role and Condit will leave the board for good next year.
REPORTS OF STRESS FROM THE START
Condit always praised Stonecipher, who took a lot of the heat for Boeing's massive layoffs and other difficult decisions, and spoke warmly of the value of Stonecipher's "unvarnished opinions."
In 2001, Boeing moved its headquarters to Chicago, not far from the company's St. Louis defense and space operations, from Seattle, where it began its legendary commercial jet business in 1916.
That move highlighted the growing defense and space operations, which eclipsed the jetliner unit, increasing resentment among long-time Boeing workers.
In Seattle, where entire families once worked for Boeing, steady job cuts and lost jetliner market share to rival Airbus SAS are blamed largely on the new overlords from McDonnell Douglas.
"It's amazing to see people that managed a company that failed taking over a company that was successful," said T.M. Sell, an associate professor at Highline Community College near Seattle who wrote a book predicting Boeing would leave town.
Hope 'Hatchet Harry' doesn't run boeing like he ran McDonnell Douglas. I also hope safety isn't cut any further at boeing under his reign.
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