Boeing could face widening crisis over ethics breakdown
WASHINGTON (AFP) Nov 27, 2003
Already rocked by a series of ethics problems, Boeing could be facing a deeper crisis that would affect the bottom line for the aerospace giant and one of the largest US defense contractors.

Earlier this week, Boeing sacked chief financial officer Mike Sears for improperly recruiting a US Air Force official to join the firm at the time she was involved in decisions that affected the company.

The case involved the hiring of Darleen Druyun, who retired late last year as the Air Force's principal deputy assistant secretary for acquisition and management, and joined Boeing in January.

Druyun, believed to be a key official in crafting a controversial tanker leasing deal with Boeing while at the Air Force, was fired by Boeing this week along with Sears.

Boeing said it had hired former US senator Warren Rudman to review the company's ethics procedures to avoid a repeat of the latest incident.

But the turbulence may only be starting for the aviation giant, which had been sanctioned by the Pentagon earlier this year following the discovery that it had obtained secret documents from its chief competitor, Lockheed Martin Corp., for a bid on a rocket project.

Defense Secretary Donald Rumsfeld said his staff was investigating if the Pentagon should suspend the 18 billion dollar deal with Boeing to lease 100 commercial wide-body jets and convert them into refueling tanker aircraft.

Asked if the contract should be delayed pending review, Rumsfeld replied: "At a senior staff meeting this morning, I asked our senior folks to ask themselves that question and to look into it."

Senator John McCain, a critic of the leasing plan, said the shakeup this week at Boeing confirmed his concerns about the company's conduct in the leasing contract.

"I am awaiting the completion of a full and complete investigation by the (Pentagon) Inspector General," McCain said. However, it strains credulity to assume that this action has nothing to do with the tanker lease deal."

The Boeing lease cost almost six billion dollars more than an outright purchase, but it allowed the Air Force to buy now and pay later. Critics termed the contract a Boeing bailout.

Other woes could be in Boeing's future as well. Federal law prohibits a company from offering jobs to public officials while the official is overseeing government business with the company, and violations can result in prison terms as well as fines.

Boeing's image meanwhile is taking a battering.

The problems with the tanker deal in the wake of the Lockheed scandal "make it clear that Boeing's ethical problems go right to the very top of its management," Ken Boehm, chairman of the National Legal and Policy Center, a watchdog group.

"After being hit with a billion-dollar sanction earlier this year by the Defense Department for unethical contracting practices, Boeing cannot assert that its ethical problems are the result of a few corrupt middle managers."

Boeing chairman and chief executive Phil Condit said the company was committed to rooting out ethical problems.

"Boeing must and will live by the highest standards of ethical conduct in every aspect of our business," Condit said. "When we determine there have been violations of our standards, we will act swiftly to address them."

Meanwhile, the Times of London reported that EADS, the European aerospace group that owns Airbus, is weighing up legal action against Boeing in the wake of the tanker deal row.

The report said the Franco-German group has told Pentagon investigators that its contract offer for the same deal suffered "collateral damage" because, it was claimed, Boeing had access to details of its bid.