Initiative To Probe Contractors For Fraud

Announcement Comes After Sentencing of Former Boeing CFO

Former Boeing finance chief Michael M. Sears, left, walking from the Alexandria courthouse yesterday with his attorney, was sentenced to four months in prison and community service. (Kevin Wolf -- AP)

Federal prosecutors yesterday announced a broad initiative to combat procurement fraud as former Boeing Co. chief financial officer Michael M. Sears was sentenced to four months in prison for illegally recruiting an Air Force official to the aerospace giant.

A Pentagon investigative unit is already looking at senior officials who have left the Defense Department within the past four years to work at defense contractors to see if there are potential criminal conflicts, law enforcement officials said.

The Procurement Fraud Working Group, which will be led by federal prosecutors in Alexandria, will include investigators from the FBI and departments of Defense, Homeland Security, State and Transportation, as well as the National Reconnaissance Office. Officials said the group will use data-mining software, for example, to look for suspicious transactions, including cases of multiple billings, and to track the flow of funds.

Paul J. McNulty, the U.S. attorney in Alexandria, said prosecutors and investigators have put top priority on procurement fraud because since the Sept. 11, 2001, terrorist attacks, the government has been pouring enormous sums of money into contracting, including into many companies based in the region. "Because the spending is substantial, there is increased opportunity for unscrupulous behavior," McNulty said.

The Naval Criminal Investigative Service, which saw the number of agents in the Washington field office dedicated to procurement fraud fall to 25 from 90 after the 2001 attacks, will be hiring new agents, the prosecutor said. And investigators will also be "embedded" with procurement officials to detect potential fraud early in the contracting process, McNulty said. "That is better than waiting for a whistle-blower or other evidence to come forward months or years later," he said.

The initiative follows the prosecution of Sears and Darleen A. Druyun, a former Air Force procurement official who admitted favoring Boeing in decisions valued at billions of dollars over the past several years. Sears negotiated a job at Boeing for Druyun while she was overseeing Boeing contracts. Boeing, the Pentagon's second-largest contractor, also hired Druyun's daughter and son-in-law. Druyun is serving a nine-month prison sentence at a minimum-security facility in Marianna, Fla.

"I am specifically looking for department officials who have committed criminal violations of law similar to Ms. Druyun," said Joseph A. McMillan, a special agent in charge of the mid-Atlantic field office of the Defense Criminal Investigative Service, which works with the Pentagon's inspector general and is leading the examination of former Pentagon officials who now work for defense firms.

In a related case yesterday, the Government Accountability Office raised concerns about Lockheed Martin Corp.'s hiring of a retired Air Force official.

Establishment of the new fraud-hunting unit expands the Druyun-Boeing investigations to the entire defense industry and is reminiscent of "Operation Ill Wind," which resulted in the convictions of dozens of government and industry officials.

McNulty announced the program after Sears's sentencing in U.S. District Court in Alexandria. Sears had asked for probation, but U.S. District Judge Gerald Bruce Lee sided with prosecutors, saying the impact of his offense on the government and taxpayers required prison time. The Pentagon's investigation into Druyun's conduct has cost $2.5 million already, prosecutors said in court documents.