Replies

Linda Daschle's involved? Wow! All see Grampa Dave's post #23.

http://www.freerepublic.com/focus/f-news/1240972/posts?page=23#23

Thanks. Here's another one.

http://seattlepi.nwsource.com/business/194292_boeinglockheed08.html
Seattle Post-Intelligencer
Friday, October 8, 2004

Boeing military scandal grows
Lockheed weighs legal action over contracts

By LESLIE WAYNE
THE NEW YORK TIMES

When the Lockheed Corp. lost a $4 billion contract to The Boeing Co. in 2001 to upgrade the electronic controls of the C-130 transport plane -- a plane that Lockheed itself had designed and built for the Pentagon since the 1950s -- the tight-knit world of military contractors was stunned.

The person handing Lockheed that harsh blow was Darleen Druyun, the No. 2 weapons buyer for the Air Force, with the authority to pick and choose among bids for multibillion-dollar military contracts. So strong was Druyun's reputation for hard work and rectitude that no one questioned her startling decision.

Today, Lockheed is once again in shock, but for different reasons. It turns out that it was competing in a rigged game -- one in which Druyun, who left her civilian position in the Pentagon last year to take a job at Boeing, now says she tilted in Boeing's favor out of gratitude for its hiring of her daughter and her daughter's boyfriend.

Lockheed is now talking with its lawyers, and the Pentagon and its extensive network of military suppliers is caught up a scandal that only grows by the day.

The career of Druyun, once the most powerful woman in the Air Force, of course, is over. Last week, she was sentenced to nine months in prison for having steered billions of dollars in Air Force contracts for four critical weapons systems to Boeing and for having overpaid the company as well.

Her downfall has wide consequences for the $140 billion Pentagon contracting industry, and its political ramifications lead all the way to the White House, where three top administration officials are under investigation in the case.

In addition, Druyun's actions are now the subject of potential lawsuits, all-but-certain congressional hearings, an expansion in ongoing federal investigations, a possible reopening of many of Boeing's contracts and additional scrutiny of the Pentagon's procurement process and the individuals who oversee it. Boeing has said it is cooperating in all federal investigations.

"This is just awful," said Richard Aboulafia, an analyst at the Teal Group, a military consulting firm in Fairfax, Va. "She was trading the keys to the kingdom."

Sen. John McCain, R-Ariz., predicted that "there will be more shoes dropping" before the scandal ends. One of those shoes may have fallen Wednesday night. Air Force Gen. Gregory Martin withdrew his nomination for one of the highest positions in the military -- commander for the Pacific and East Asia -- after a blistering attack by McCain in a hearing over Martin's close ties to Druyun.

Many of the affected parties are still reeling from Druyun's admission that she favored Boeing on the four Air Force contracts: a controversial aerial refueling tanker plan, a NATO airborne early warning and control system and a C-17 cargo plane contract, as well as the transfer of the C-130 work from Lockheed.

Although many industry analysts do not see any immediate upheaval, they predict that eventually Boeing could, among other things, be subject to an outside monitor and forced to pay substantial fines.

Some independent experts are already saying that, at a minimum, some contracts should be reopened.

"Lockheed has been jumping up and down for years saying that she had been favoring Boeing over them," said Danielle Brian, executive director at the Project on Government Oversight, a Washington non-profit that studies weapon systems.

The full extent of Druyun's pro-Boeing bias came as a surprise at her sentencing hearing in court Friday. Previously, Druyun's only known misdeed was that she had negotiated a $250,000 job at Boeing while overseeing Boeing Air Force contracts.

But she had long maintained that this conflict had not tainted her professional judgment.

Only after failing a lie detector test did Druyun finally admit that her weapons-buying decisions were influenced by a desire to curry Boeing's favor for herself and her family.

Court papers show that Druyun, while still at the Pentagon, met in secret with Boeing executives to talk about a job and to protect her daughter, a Boeing employee who had received a poor performance review. After that revelation, Boeing's chief financial officer, Mike Sears, who negotiated Druyun's employment contract, was fired. He is now cooperating with prosecutors.

The new evidence of Druyun's wrongdoing challenges just about every assumption Washington insiders held about her. In her three-decade career, Druyun's reputation for toughness as she rose in the male-dominated Pentagon was so strong that she was nicknamed the "Dragon Lady."

By next week, Lockheed will have to decide whether to lodge a protest under federal contracting law with either the Air Force of Congress' budget watchdog, the Government Accountability Office, or through the courts.

"We haven't decided what we are going to do," said Thomas Jurkowsky, a Lockheed spokesman, who pointed out that Litton Systems had succeeded in overturning a tainted contracted during the "Ill-Wind" military procurement scandals of the mid 1990s.

If the Air Force determined that Boeing's C-130 contract was fraudulently awarded, it could, in theory, terminate the contract and seek to recover all money paid to Boeing, said Steven Schooner, co-director of the government procurement law program at George Washington University. As a practical matter, however, Schooner doubts that would happen.

"Would I bet on it? No," he said. "But this is the most dramatic case in two decades, and the most egregious one in the modern era of procurement."

At the White House, the Justice Department is continuing a review of e-mail exchanges among three top administration officials involved in one of the contracts Druyun negotiated -- a controversial $23.5 billion aerial refueling tanker proposal that has since been sidetracked over questions about its value.

Druyun admitted giving Boeing a sweetheart price on the tanker deal as a "parting gift," according to court papers, as well as giving Boeing proprietary data from a rival bidder, the Airbus European consortium. EADS North America, a unit of Airbus' corporate owner, which is already engaged in a competitive feud with Boeing, said it is also considering some form of legal action, yet to be determined.

At the Air Force, spokesman Douglas Karas said an internal review of Druyun's contracts that began last December would be expanded by the new revelations. Already, a $100 million payment to Boeing that Druyun negotiated and now has admitted in court papers was too high is being renegotiated. That payment was for Boeing's work on the NATO airborne early warning system.

Druyun's latest admissions could not have come at a worse time for Boeing. The company is currently operating under a ban that prevents it from bidding on new Air Force contracts to launch rockets, after it was discovered that Boeing employees had stolen up to 25,000 proprietary Lockheed documents. The Air Force also stripped Boeing of $1 billion in rocket contracts.

After the Druyun scandal erupted late last year, Boeing Chief Executive Phil Condit resigned. A number of Boeing employees, including James Albaugh, who runs the company's defense unit, have met with federal prosecutors.

An official close to the U.S. Attorney's Office said Albaugh is not a target of its investigation.