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Judge Assails Rocketdyne Cleanup

Environmentalists hail a federal jurist's ruling that a Department of Energy effort to rid the Santa Susana field lab of pollutants is inadequate.

By Gregory W. Griggs
Times Staff Writer
May 3, 2007

Environmental activists won a major victory Wednesday when a judge declared that the U.S. Department of Energy continues to violate federal law in its cleanup of nuclear and chemical contamination at Boeing's Rocketdyne field laboratory near Simi Valley.

U.S. District Judge Samuel Conti also barred the DOE from transferring ownership of its Santa Susana property until it conducts a more thorough environmental review of its cleanup operations at the former nuclear and rocket engine testing facility.

"The Bush administration was trying to cut corners at the expense of public health, and the judge wasn't having any of it," said James Birkelund, a Los Angeles-based attorney for the lead plaintiff, the Natural Resources Defense Council.

Boeing Corp. spokeswoman Blythe Jameson said the company, which sold the remainder of the Rocketdyne assets in 2005 to United Technologies Corp.'s Pratt & Whitney unit for about $700 million, would withhold comment on the court ruling. Boeing still owns the 2,800-acre hilltop property that contains the lab.

"It's just been issued and we're reviewing the court's decision," Jameson said.

But Daniel Hirsch, president of the anti-nuclear group Committee to Bridge the Gap, a co-plaintiff in the lawsuit, said that nowhere in the 47-page ruling did the judge side with the DOE, and by extension the property owner, Boeing, which purchased the field lab 11 years ago.

"What the judge is essentially saying to the DOE is: 'You guys have really fouled up this cleanup; you've broken the law repeatedly. And I'm going to retain jurisdiction until I'm satisfied that you've met your obligations to clean up the mess you've made.'"

The two nonprofit environmental groups sued the Energy Department alleging that the cleanup plan for the property � where U.S. agencies conducted nuclear research over four decades before ceasing operations in the late 1980s � would leave dangerous levels of radioactive material and other toxic chemicals in the soil.

Energy Department officials have said that the site, where a nuclear reactor meltdown occurred in 1959, would pose no significant threat to human health or the environment after it is cleaned up. But critics and watchdog groups have demanded that a full environmental impact statement be prepared and that the site be cleaned up to tougher U.S. Environmental Protection Agency standards, which would require removal of tens of thousands of cubic yards of contaminated soil.

Conti's ruling requires DOE to prepare a more stringent review of the lab, which is on the border of Los Angeles County. Conti wrote that the department's decision to prepare a less-stringent environmental document prior to cleanup is in violation of the National Environmental Policy Act and noted that the lab "is located only miles away from one of the largest population centers in the world."

U.S. Sen. Dianne Feinstein (D-Calif.) and her colleague Sen. Barbara Boxer (D-Calif.), chairwoman of the Senate Committee on Environment and Public Works who has been pushing for more stringent cleanup of the site, praised the judge's decision.

"On behalf of the people who live near Rocketdyne, I am so gratified that the court has found in their favor," Boxer said. "It is our solemn duty in government to protect the health and safety of the people we represent."

Hirsch and others said the DOE and Boeing appear to have accelerated the cleanup in recent months.

Critics suggest the rush was to get the Rocketdyne site declared officially "clean" before the Bush administration leaves office, fearing the next president may be tougher on environmental polluters.

Last month, the EPA announced that it would reconsider its decision not to add the Santa Susana Field Laboratory to its federal Superfund cleanup list.

The designation would provide more federal funding.

State Sen. Sheila Kuehl (D-Santa Monica) said she welcomed the consideration.

"Overall, the attention focused on this site by the EPA is very important. It rattles a few cages."

Grand Jury Probing Field Lab

By Kerry Cavanaugh, Staff Writer
LA Daily News
12/05/2005 08:37 PM Release

Boeing Co. officials revealed Monday that a federal grand jury is investigating the Santa Susana Field Lab and has subpoenaed records monitoring storm-water pollution leaving the site.

Company officials did not provide details, but said a grand jury had demanded documents relating to the locations where storm water and wastewater are discharged from the former nuclear and rocket-testing laboratory, owned by Boeing.

The company monitors the creeks and waterways that drain water from the property in order to detect contamination and prevent it from flowing into the Los Angeles River and Arroyo Simi.

Boeing is cooperating with authorities, spokeswoman Inger Hodgson said.

"In 55 years of operation at the Santa Susana Field Lab, the company has made every effort to comply with existing regulations and has made every effort to cooperate with regulators."

Officials with the U.S. Attorney's Office and the Federal Bureau of Investigation would not confirm or deny whether they are the source of the federal inquiry.

The field laboratory has been operating since the 1950s, when it contracted with the U.S. Department of Defense to conduct nuclear research. The company also contracted with NASA and the Department of Defense for research and rocket-engine testing.

The site is now under a federally ordered environmental cleanup, with the U.S. Department of Energy overseeing the nuclear decontamination and the California Department of Toxic Substances Control supervising the chemical cleanup.

Contaminants found in the lab soil and in wastewater ponds on the property include highly toxic dioxins, heavy metals and mercury.

In the past seven years, Boeing has racked up nearly 100 regulation violations for tainted water leaving the site, and the company paid a $39,000 fine in 2002.

Earlier this year, Boeing settled a lawsuit filed by residents of the San Fernando and Simi valleys who say they were sickened by toxics released at Santa Susana - though Boeing denied any harm.

News of the grand jury investigation came as California water regulators crack down on the lab for some 40 violations of its storm-water permit since July 2004.

Last week, the Los Angeles Regional Water Quality Control Board ordered Boeing to prevent pollutants from getting into the waterways, and the board is preparing another order this week.

Executive Director Jonathan Bishop said the water-quality board gave Boeing two notices of violations this year detailing toxins and heavy metals flowing from the property, but that the company hasn't done enough to fix the problems.

"They are not a normal, run-of-the-mill site, and they are expected to have a very stringent monitoring program," Bishop said.

Boeing received a new water permit in 2004, and company officials have complained that limits are extremely strict and sometimes penalize the lab for chemicals found at levels below background concentrations in the area. They also have said wildfires in 2003 dropped ash on the property, and that caused some violations. In addition, Hodgson said, this past winter brought record rainfall and more erosion.

"Generally, our permit exceedances since 2004 have been below drinking-water standards and do not pose a risk to surrounding communities," Hodgson said.

Environmental watchdogs said they were glad that water regulators were finally enforcing state law, but were frustrated that Boeing has not been fined or penalized for violating laws meant to protect fish and wildlife along the region's waterways.

"I keep waiting for teeth," said Dan Hirsch of the Committee to Bridge the Gap.

"This is a multibillion-dollar company for whom it is much cheaper to violate pollution laws than comply. I'm waiting for regulators to make this significantly more costly so that Boeing will stop polluting its neighbors."

Ex-Boeing Exec Gets Jail Term in Procurement Scandal
By Peter Pae
Times Staff Writer
10:06 AM PST, February 18, 2005-- Boeing's former chief financial officer was sentenced today to four months in prison and fined $250,000 for illegally offering a job to a former Air Force official while she was negotiating a multibillion-dollar contract with the aerospace giant.

Michael M. Sears, 57, will also face two years of probation under the sentence handed down by a U.S. District Court judge in Virginia. Sears, who pleaded guilty in November to one count of aiding and abetting illicit employment negotiations, faced up to six months in prison and a $250,000 fine under federal sentencing guidelines.

The former aerospace executive has admitted improperly offering Air Force procurement official Darleen Druyun a position at Boeing while she was concluding negotiations on a $23-billion Air Force deal to acquire 100 aerial refueling tankers from the company.

Druyun and Sears are key figures in the biggest Pentagon procurement scandal in decades. Boeing, based in Chicago, is the largest private employer in Southern California, with about 36,000 workers, many of whom work in the company's defense operations.

Last fall, Druyun conceded that she helped Boeing gain favorable terms on at least four major Pentagon contracts. Beyond offering her work, the company had given jobs to her daughter and future son-in-law. She was sentenced to a nine-month prison term in October.

Druyun eventually left the Air Force and took a $250,000-a-year post as vice president of Boeing's missile defense business. In November, 2003, the company fired her and Sears.

The scandal has prompted the Pentagon and other government agencies to review a host of contracts that Druyun handled during her nine years as the second-highest-ranking acquisition official in the Air Force.

The Pentagon probe found that only eight of the more than 400 contracts overseen by Druyun were questionable, including four awarded to Boeing Co.

Boeing executives have long maintained that Sears acted alone in recruiting Druyun.

Times staff writer Jesus Sanchez contributed to this report.

Ex-Executive of Boeing Pleads Guilty

Michael Sears admits to recruiting a Pentagon official as she negotiated a deal with the company.

By Peter Pae and Jube Shiver Jr.
Times Staff Writers
November 16, 2004
ALEXANDRIA, Va. � Former Boeing Co. Chief Financial Officer Michael M. Sears pleaded guilty Monday to illegally offering a job to a former top Air Force acquisition official while she was negotiating a military contract with the aerospace giant.

Sears, 57, said little during the 15-minute hearing before a federal judge here. But in a statement, he admitted improperly offering Darleen Druyun a position at Boeing while she was concluding negotiations on a $23-billion Air Force deal to acquire 100 aerial refueling tankers from the company.

Sears, who is scheduled to be sentenced Jan. 21, faces a maximum of five years in prison and a $250,000 fine.

Druyun and Sears are key figures in the biggest Pentagon procurement scandal in decades. Boeing, based in Chicago, is the largest private employer in Southern California, with about 36,000 workers, many of whom work in the company's defense operations.

Last month, Druyun made a surprise admission that she helped Boeing obtain favorable terms on at least four major Pentagon contracts because, beyond offering her work, the company had given jobs to her daughter and future son-in-law.

As a result, investigators from the Pentagon and other government agencies have been reviewing a host of contracts that Druyun handled during her nine years as the second-highest-ranking acquisition official in the Department of the Air Force.

Sears pleaded guilty to one count of aiding and abetting illicit employment negotiations in a violation of conflict-of-interest laws.

Under his plea agreement, Sears pledged to cooperate with investigators as they continue their investigation. According to federal sentencing guidelines, he faces little � up to six months � or no time in jail.

Yet prosecutors want more out of Sears. They have been trying to persuade him to agree to a broader plea that the talks he had with Druyun tainted Boeing's defense contracts and hurt taxpayers. That, in turn, could lead to the cancellation of a number of Boeing projects.

But Sears has balked at making that admission, according to sources familiar with the case, making it likely that prosecutors will continue to press him before his sentencing. As part of his plea agreement, Sears said he would submit to a polygraph test, a step that in Druyun's case led to her bombshell admission about her bias toward Boeing.

"Michael Sears' secret employment negotiations with a senior Air Force official struck at the heart of the integrity of the multibillion-dollar defense acquisition process," U.S. Atty. Paul J. McNulty said. "Our investigation is ongoing. We're going to take it one step at a time."

At least for now, though, Sears' plea may represent a minor victory for Boeing because of "what it doesn't say," noted James McAleese, a lawyer who specializes in defense contracts.

"There is no admission by a Boeing officer that the previous contracts were tainted by wrongdoing," McAleese said. "It has been limited to wrongful hiring as opposed to any long-term conspiracy impacting multiple Boeing contracts."

Meanwhile, court filings released Monday provided further details of Druyun's job negotiations as she pitted archrivals Lockheed Martin Corp. and Boeing against each other as they bid for her services. Several times Druyun told Boeing executives, including defense chief James Albaugh, that she'd accepted a job at Lockheed. But Druyun's daughter continued to e-mail Sears that her mother wanted to work for Boeing.

Druyun finally took a $250,000-a-year post as vice president of Boeing's missile defense business. Last November, the company fired her and Sears.

Boeing executives have long maintained that Sears acted alone in improperly recruiting Druyun. "Today's action brings this matter one step closer to closure," said Doug Bain, Boeing's general counsel. Sears' admission shows "that no Boeing executive other than Mr. Sears engaged in any wrongdoing in connection with Ms. Druyun's hiring."
*Pae reported from Los Angeles and Shiver from Alexandria.

Former Air Force Buyer Jailed Over Boeing Deals

Saturday, 02 October 2004

ALEXANDRIA, Virginia (Reuters) -- The U.S. Air Force's former No. 2 weapons buyer was sentenced to nine months in prison on Friday after telling the court she had given Boeing Co. a rival's secret data and inflated weapons deals to ingratiate herself with the company, her future employer.

The disclosure of Darleen Druyun's efforts on behalf of Boeing could spark a new round of ethical, legal and business headaches for the Chicago-based aerospace giant, the Pentagon's No. 2 supplier after Lockheed Martin Corp.

Druyun, 56, tearfully acknowledged before Federal District Judge T.S. Ellis she had agreed to a higher price than she thought was appropriate for what became a $23.5 billion plan to acquire modified Boeing 767 aircraft as refueling tankers.

"The defendant did so, in her view, as a 'parting gift to Boeing' and because of her desire to ingratiate herself with Boeing, her future employer," according to a statement of facts she signed.

Druyun was also sentenced to seven months of post-prison confinement in a halfway house or home detention, a fine of $5,000 and 150 hours of community service. She was the top official at the Pentagon convicted for corruption since the so-called Ill Wind fraud cases in the late 1980s.

Druyun pleaded guilty in April to a conspiracy charge for illegally negotiating a $250,000-a-year Boeing job while overseeing billions of dollars of the company's contracts.

She was hired by Boeing in January 2003, two months after leaving the Air Force, where she had held the No. 2 acquisition job since 1993. In November, she was fired along with Boeing's chief financial officer, Michael Sears, who recruited her. Boeing's chief executive, Phil Condit, resigned a week later.

Related probes

Since then, Boeing has been dogged by related probes by Congress, the Defense Department and federal prosecutors.

"The statements Ms. Druyun made in her sentencing papers came as a total surprise to The Boeing Company," Boeing said in a statement.

In her sentencing papers, Druyun admitted giving Boeing pricing data from Airbus, a European rival 80 percent owned by EADS, during the tanker discussions.

Airbus, also owned by BAE Systems Plc, saw its bid to provide the tankers rejected on the grounds that its offering did not fit Air Force requirements.

Druyun's statements may further delay acquisition of new tankers, a process Defense Secretary Donald Rumsfeld put on hold in December pending a review of the Air Force's needs.

"I'm afraid there is still more misconduct on the part of the Air Force that has to be looked at," said Sen. John McCain, an Arizona Republican who has complained of "incestuous" ties between Boeing and the Air Force.

Keith Ashdown of Taxpayers for Common Sense, a budget watchdog group, said he expected the tanker competition to be reopened from scratch, with Airbus invited to bid.

In entering her plea in April, Druyun had agreed to cooperate fully in the government's investigation -- a promise, it emerged Friday, she had not initially kept.

After failing a lie detector test over the summer, she dropped her long-standing claim she had always acted in U.S. taxpayers' best interests while at the Air Force, Robert Wiechering, an assistant U.S. attorney, told the court.

In court, she admitted that, as board chairman of a NATO Airborne Early Warning and Control program, she negotiated what she deemed an overly generous $100 million payment to Boeing as part of a 2002 restructuring of the AWACS program.

Druyun also admitted she picked Boeing over four competitors for a $4 billion upgrade to C-130 transport planes -- "and now acknowledges that she was influenced by her perceived indebtedness to Boeing for employing her future son-in-law and daughter," the statement of facts said.

The Air Force said it would renegotiate any Druyun-negotiated contracts, if warranted, and said it had already begun adjusting NATO's AWACS deal.

In a new line of inquiry, the Bush administration is refusing to allow Senate investigators to review more than 100 e-mails connected to Air Force acquisitions chief Marvin Sambur, sources familiar with the matter told Reuters.

The Senate Armed Services Committee was told the e-mails, some involving communication with Druyun, were "law enforcement sensitive," the sources said.

Last month, White House officials asked the Justice Department to investigate a possible conflict of interest involving Air Force Secretary James Roche and Robin Cleveland, an associate director at the White House's Office of Management and Budget, which reviewed the tanker plan.

Another Boeing Employee Charged with Conspiracy

By Peter Pae Times Staff Writer
May 12, 2004

Federal prosecutors filed criminal charges against a third former Boeing Co. employee Tuesday, broadening an investigation into allegations that the company stole trade secrets from rival Lockheed Martin Corp. to win a multibillion-dollar rocket contract.

Larry Satchell, 65, a former rocket manager at Boeing's Huntington Beach facility, was charged with obstruction of justice, conspiracy and theft of trade secrets. The charges stemmed from the federal probe into Boeing's use of Lockheed materials to win a $5-billion contract in the late '90s to build a new generation of rockets known as Evolved Expendable Launch Vehicles, or EELV.

Last year, prosecutors filed criminal charges against former Boeing employees Kenneth Branch and William Erskine, both of whom worked with Satchell.

"He is innocent of these charges," Satchell's attorney, Michael W. Fitzgerald, said Tuesday. "Mr. Satchell enjoyed a distinguished career in aerospace for 40 years, and throughout his career he has contributed to our national defense."

Imposing one of the stiffest penalties ever levied against a defense contractor, the Air Force last summer stripped Boeing of about $1 billion of rocket contracts and indefinitely suspended the company from seeking future rocket work.

The rocket investigation is being led by the U.S. attorney's office in Los Angeles.

Prosecutors claim that Branch, who previously worked for Lockheed, illegally possessed proprietary Lockheed documents and that Erskine hired Branch because he had the documents.

Branch and Erskine have pleaded not guilty.

According to the charges filed Tuesday, Satchell led Boeing's "capture team," a group directed to "acquire intelligence, technical and cost data" on Lockheed Martin's proposal for the EELV rocket contract.

The charges against Satchell appear to rely significantly on the testimony of another former Boeing employee, Matthew Jew, who was given immunity from prosecution in April.

Jew worked at Boeing as a cost estimator. In an affidavit, he told investigators that Satchell had given him documents that "appeared to be cost-data-associated with Lockheed Martin lift vehicles" that Boeing used to calculate an estimate of its rival's rocket costs.

Then, in the summer of 1999, as Boeing lawyers were concluding an internal investigation into the alleged theft, Satchell told Jew to destroy the documents he had been given, which Jew did, according to court papers. In March, Jew was able to recover some electronic data he had stored in his laptop computer.

Satchell told Jew that they could "lose their jobs and that 'if this were to come out � Boeing could lose the entire EELV program,' " according to the affidavit.

The charges against Satchell came nearly five years after Boeing fired Branch and Erskine and reprimanded Satchell for possessing the proprietary documents and then destroying them. Satchell retired from Boeing in 1999.

Shortly after they were fired, Branch and Erskine filed a wrongful-termination lawsuit that Boeing eventually won. But during the discovery stage of the lawsuit, information surfaced that led the Air Force and Justice Department to investigate the Lockheed case.

Boeing has maintained that the document pilfering involved only a handful of employees and that they acted on their own. No other Boeing senior officials or the company itself have been named in the criminal charges.

The Lockheed case is one of two major ethics scandals that have rocked the aerospace giant in the last year.

Boeing also is facing the loss of a $23-billion Air Force deal for 100 aerial tankers. The tanker deal is under review by the Pentagon partly because of allegations that Boeing was talking to a Pentagon acquisition official about a job at the company while the official was negotiating the tanker deal.

Former Boeing Manager Faces Charges

Larry Satchell Charged with Conspiracy Over Theft of Documents in Defense Contract Bid.

By Jesus Sanchez Times Staff Writer
4:33 PM PDT, May 11, 2004

A former Boeing Co. manager in Orange County was charged today by federal prosecutors for his alleged role in a corporate espionage scandal that forced military officials to strip the aerospace giant of a billion-dollar rocket contract.

The criminal complaint filed in federal court in Los Angeles charged Larry Satchell, who headed a Boeing planning and marketing analysis group known as the "Capture Team," with conspiracy and obstruction of justice, among other things.

Authorities have issued an arrest warrant for Satchell, who is scheduled to turn himself in Wednesday, officials said. Satchell is the third company employee to be charged with allegedly using illegally obtained documents from rival Lockheed Martin to help his company win a lucrative contract to develop a new generation of rockets to launch military satellites. Boeing was awarded the contract in 1998.

Satchell, who worked in Boeing's Huntington Beach office, was the manager for engineers Kenneth Branch and William Erskine. The so-called "Capture Team" was directed to collect and analyze information about Lockheed Martin's bid for the rocket launch system.

Both Branch and Erksine, who were fired by Boeing, pleaded not guilty last year to government charges for allegedly stealing the Lockheed Martin documents. Satchell retired after he was reprimanded by the company.

In 1998, Boeing landed a contract to build 21 of the 28 satellite launch vehicles for the Air Force. Lockheed, which had been a prime military launch vehicle contractor for years, received a contract for just seven of the rockets.

However, last year, the Air Force found that Boeing violated federal law by having thousands of Lockheed documents in its possession. The Air Force took away at least $1 billion in rocket contracts from Boeing and gave them to Lockheed in one of the harshest penalties ever against a defense contractor.
Times staff writers Peter Pae and John O'Dell contributed to this report.

Boeing Finds More Possible Misdeeds
Boeing Obtained a Rival's, (Lockheed Martin's), Data in Bidding for a Third Rocket Deal. But a Five-Year Statute of Limitations has Expired.
By Peter Pae Times Staff Writer
May 7, 2004
Boeing Co., already under investigation for possible corporate espionage, has informed the Air Force of another case in which one of its employees may have improperly possessed a rival company's proprietary documents.

But because of a five-year statute of limitations, federal investigators are unlikely to focus on those documents, which date from the early 1990s, as they continue their probe, legal experts said.

The latest disclosure comes as investigators examine two separate instances of Boeing employees accused of illicitly obtaining trade secrets from rival Lockheed Martin Corp. and then using them to win multibillion-dollar contracts for rockets.

Two former employees who worked at Boeing's Huntington Beach facility have been criminally charged and the Pentagon last summer stripped Boeing of about $1 billion in rocket contracts and suspended it from bidding on future military rocket launch contracts.

Boeing acknowledged last week that federal investigators also were looking into the possibility that the company used "nonpublic" Lockheed information to win a separate NASA rocket contract.

But the company did not disclose at that time that its own internal investigators had found a third case of potential document pilfering.

In an April letter to the Air Force, Boeing said it recently discovered that a mid-level manager who prepared cost estimates of competitors' bids possessed proprietary documents from Martin Marietta, a Lockheed Martin predecessor.

The employee, Matthew Jew, resigned last month and has since been cooperating with investigators. Jew, who couldn't be reach for comment, prepared cost estimates on all three rocket contracts.

Boeing executives said Thursday that the documents did not factor into the company's own pricing as it competed against Martin Marietta for the $1-billion rocket contract in the early 1990s.

The contract was awarded to Boeing.

The Air Force and the Justice Department, citing the ongoing nature of the investigation, declined to comment on the latest disclosure.

Boeing's Misconduct Is Detailed in Memo

By Peter Pae
Los Angeles Times Staff Writer
April 23, 2004

An internal Air Force memo suggests a broad pattern of improprieties by Boeing Co. when it bid on Pentagon contracts, apparently contradicting the aerospace giant's assertions that such problems were isolated and that it corrected them quickly.

According to the memo, Boeing misled federal investigators and lied about the number of documents that Boeing employees stole from rival Lockheed Martin Corp. to win a lucrative rocket contract.

The Air Force hit Boeing last summer with one of the harshest penalties ever imposed on a defense contractor when it took away about $1 billion in rocket contracts and indefinitely suspended the company from bidding on future rocket deals.

The 10-page memo offers details on the rocket contract scandal, saying that thousands of pages of Lockheed Martin documents gave Boeing an unfair advantage to develop a new generation of rockets known as Evolved Expendable Launch Vehicles, or EELV. The memo says that "an independent team of pricing experts determined" that the documents helped Boeing calculate Lockheed's bid within 2.4% of the offer.

The memo also reveals for the first time how the Air Force in 1999 considered suspending Boeing for having in its possession proprietary papers from Raytheon Corp. when the two rivals were competing for a missile defense program contract.

"Boeing's misuse of a competitor's proprietary documents � is not unique to the EELV program," Steven A. Shaw, the Pentagon's deputy general counsel, says in the memo.

It is included in a recent court filing in a civil lawsuit filed by Lockheed against Boeing in federal court in Orlando.

As Boeing was on the verge of winning the rocket contract, the memo says another Boeing "capture team" was busy reviewing, analyzing and copying the proprietary documents laying out Raytheon's proposal for a missile defense system.

They were inadvertently left at Boeing's Downey facility by an Army official in 1998. A Boeing software engineer discovered the file, but instead of destroying it "or returning it to Raytheon or the Army," it was copied and analyzed, according to the memo.

At least one Boeing employee was involved in both the Lockheed and Raytheon incidents, according to the memo. It doesn't identify the employee.

Boeing's apparent failure to abide by its assurances to report and deal with improper activities angered Air Force officials and compounded the penalty in the Lockheed EELV case, said a source familiar with the Air Force discussions.

A Boeing spokesman declined to comment Thursday on the Air Force memo because he had not seen it. Boeing stands by its position that the theft of Lockheed documents involved only "a handful of its employees" and that Boeing has aggressively implemented an overhaul of its ethics policies, said the spokesman, Dan Beck.

"We took the suspension very seriously, and since then Boeing has continued to cooperate fully with the Air Force," Beck said.

Lockheed spokesman Jeff Adams said that "the documents related to this case � speak for themselves."

The rocket scandal was the first of two that rocked Boeing last year, leading to the resignation of longtime Chief Executive Phil Condit.

Last fall, the Pentagon and Congress began investigating whether Boeing Chief Financial Officer Mike Sears improperly offered a job to a Pentagon official as she was negotiating a $24-billion deal to lease and buy 100 aerial refueling tankers from Boeing. The company hired the official, Darleen Druyun, after she left the Department of the Air Force.

Sears and Druyun were fired in November. This week, Druyun pleaded guilty to one count of conspiracy.

Boeing CEO Harry Stonecipher said this month that a tentative agreement had been reached with the Air Force to restore Boeing's status as a rocket contractor and that he expected the Air Force to make a formal announcement within a "few weeks."

An Air Force official said Thursday that she was unaware of an agreement or any possible announcement in the foreseeable future related to the rocket program.

The Lockheed case has long plagued Boeing, which has consistently blamed a few rogue employees for wrongly obtaining Lockheed documents.

The Air Force memo says that at least one Boeing senior executive possessed a Lockheed document and that another executive may have encouraged their pilfering. In addition, the memo says, Boeing's management continually misled the Air Force and provided "false statements."

Early on, the Air Force said Boeing led it to believe the company had only two sets of Lockheed documents. Later, Boeing acknowledged having two boxes. But Boeing actually had eight boxes, according to the memo.

In his July 24, 2003, memo, Shaw concludes that Boeing had 24,500 pages of Lockheed documents. In a court filing last month, Lockheed said it had received an additional 18,000 pages of documents from Boeing.

"To date, Boeing has returned to Lockheed Martin over 42,000 pages of material," a Lockheed lawyer wrote. "These documents have been in Boeing's possession for years, even as Boeing represented to Lockheed Martin that it had disclosed all of the Lockheed Martin documents it had in its possession, even though it was clearly not the case."

Former Boeing Executive Pleads Guilty to Conspiracy
From Reuters
21 April,2004

A tearful former top Air Force official Tuesday pleaded guilty to conspiracy for discussing a job with Boeing Co. while overseeing the Air Force's business dealings with the company.

Darleen Druyun, 56, who retired as the No. 2 Air Force acquisition official in November 2002 and took a job with Boeing two months later, agreed to cooperate with prosecutors who are investigating Michael Sears, the former Boeing chief financial officer who hired her.

"I deeply regret my actions," an emotional Druyun told Judge T.S. Ellis III in U.S. District Court for the Eastern District of Virginia.

Druyun has been under investigation for possible conflicts of interest in a $23.5-billion Air Force plan to lease and buy 100 Boeing 767s as refueling planes. Defense Secretary Donald H. Rumsfeld said Tuesday that the deal remained on hold pending several additional reviews.

Boeing fired Druyun and Sears on Nov. 24, saying the two violated company ethics rules by discussing a Boeing job for Druyun while she was working on Boeing-related Air Force programs and then trying to cover it up. Boeing Chief Executive Phil Condit resigned a week later.

Druyun on Tuesday admitted negotiating the Boeing job with Sears while at the Air Force and then conspiring with him to conceal the talks. She also admitted to asking a senior Boeing executive to secure jobs for her daughter, Heather McKee, and her then-boyfriend, now husband.

Druyun faces a maximum of five years in prison and a $250,000 fine. Her sentencing is scheduled for Aug. 6.

Under the terms of the plea agreement, Druyun will provide any information and documents she has about any criminal behavior and submit to a lie-detector test.

The government agreed not to prosecute Druyun's daughter � who is still employed by Boeing � for her role in facilitating communications between Druyun and Sears.

U.S. Atty. Paul McNulty told reporters the government's investigation would continue.



Boeing Fires Chief Financial Officer and Former Air Force Official
Mike Sears is accused of negotiating the hiring of a U.S. government employee who was in a position to influence Boeing contracts. The former Air Force official, Darleen Druyun, also was fired.
By Mary MacVean
Times Staff Writer
11:02 AM PST, November 24, 2003

Boeing Co. fired its chief financial officer and another executive because of allegedly unethical communications they had while the executive still worked for the government, the company said today.
Mike Sears, the CFO, and Darleen Druyun, who has been vice president and deputy general manager of Missile Defense Systems, tried to conceal their misconduct, Boeing said in a statement from its Chicago headquarters.
The aerospace giant said it has informed the Air Force of its actions and is cooperating with the government in its investigation of the matter.
Los Angeles native James Bell was named acting chief financial officer, replacing Sears. He had been senior vice president of finance and corporate controller.
Boeing said in a statement that Sears was dismissed for violating company policies by communicating with Druyun about future employment when she had not disqualified herself from acting in her official government capacity on matters involving Boeing.
"Compelling evidence of this misconduct by Mr. Sears and Ms. Druyun came to light over the last two weeks," Boeing Chairman Phil Condit said in a statement.
Controversy has surrounded a plan for the Air Force to acquire 100 Boeing 767 planes to use as refueling tankers.
President Bush today signed the defense authorization bill that included approval of a compromise tanker deal, lowering the initial $21 billion price by $3 billion to $5 billion. Under the deal, the Air Force will lease 20 Boeing planes immediately and buy 80 more planes.
The Pentagon launched an investigation this fall into allegations that Druyun acted improperly in giving Boeing financial information about a competing bid on the lease deal.
Boeing has denied wrongdoing in the competition for the tanker contract. The company said the dismissals resulted from an internal investigation.
In July, the Air Force hit Boeing with some of the harshest penalties ever imposed on a defense contractor, taking away at least $1 billion worth of rocket contracts. The Air Force said it was punishing Boeing for "serious violations of federal law" when it illicitly obtained thousands of pages of trade secrets from rival Lockheed Martin Corp.
At that time, Boeing had hired consultants to review its ethics programs.
Condit said today that he has asked the consultants to review Boeing's procedures on hiring government employees "to ensure this type of incident never happens again."
Bell, who earned a degree in accounting at Cal State L.A., joined Rockwell in 1972 as an accountant. Boeing acquired the space and defense businesses of Rockwell in 1996.
Boeing's stock fell 57 cents to $38.29 this morning on the New York Stock Exchange.
The Associated Press contributed to this report.

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