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Ex-Boeing CFO Pleads Guilty in Druyun Case

By Jerry Markon and Renae Merle
Washington Post Staff Writers
Tuesday, November 16, 2004; Page E01

The former chief financial officer for Boeing Co. pleaded guilty yesterday to a conflict-of-interest charge, admitting his role in the illegal hiring of an Air Force official who was overseeing military contracts involving the aerospace giant.

Michael M. Sears, 57, entered his plea in U.S. District Court for the Eastern District of Virginia in Alexandria. Sears, who was once considered a leading candidate to be Boeing's chief executive, now faces up to five years in prison when he is sentenced on Jan. 21. He is free on $50,000 bond.

Michael M. Sears pleaded guilty to overseeing the hiring of former Air Force official Darleen A. Druyun, who gave Boeing preferential treatment. (Ken Cedeno -- Bloomberg News)

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Sears acknowledged that he orchestrated the hiring of Air Force procurement official Darleen A. Druyun, who became vice president in charge of Boeing's missile defense systems in January 2003. Court documents said employment negotiations began while Druyun still worked at the Air Force, overseeing Boeing contracts that included a controversial $23 billion tanker deal between the company and the military service. Druyun earlier pleaded guilty in the scheme.

Druyun's admissions that she inflated prices on Boeing contracts to curry favor with her prospective employer have rippled through the defense industry and the Air Force, spurring the largest review of how the military buys weapons since a previous contracting scandal in the 1980s. Boeing rivals such as Lockheed Martin Corp. are protesting the favoritism Druyun showed Boeing in competitions for weapons systems contracts. The protests could cost the Pentagon millions if the Defense Department decides to reimburse Boeing's rivals for their costs developing contract proposals and bids.

Sears's plea to a single charge of aiding and abetting acts affecting a personal financial interest was another step in the federal probe of Chicago-based Boeing. Court documents said Sears e-mailed numerous other senior officials at Boeing about his negotiations with Druyun and even had the matter placed on the agenda for a meeting of a group of top executives.

But law enforcement sources said it is difficult to prove criminality in complicated corporate cases like this one, and they said it is unclear whether anyone else would be charged. Much depends, the sources said, on what Sears tells the government in debriefings over the next several months.

"Just because someone was [copied] on an e-mail does not mean they were willfully involved in the conduct," said one law enforcement official who requested anonymity because the investigation is ongoing. "The logical thing was to get Sears to plead and then see where the ball carries you."

Stuart B. Nibley, a Washington lawyer who is a government contracting expert, said one key question will be whether other Boeing executives knew that Druyun had not yet recused herself from dealing with Boeing matters at the Air Force when she started her employment discussions.

"Just the very fact that the e-mails were sent and meetings set indicated some level of knowledge existed," said Nibley. "It just depends on whether that knowledge rose to the level that Mr. Sears had."

In a firm voice and with his hands clasped in front of him, Sears admitted his guilt yesterday before U.S. District Judge Gerald Bruce Lee. He did not otherwise speak at the hearing, and Sears and his lawyers would not comment afterward.

Federal officials hailed the guilty plea. "Michael Sears's secret employment negotiations with a senior Air Force official struck at the heart of the integrity of the multibillion-dollar defense acquisition process," said U.S. Attorney Paul J. McNulty.

Joseph A. McMillan, special agent in charge of the Defense Criminal Investigative Service's Mid-Atlantic Field Office, said Sears "knew the rules," but that "he and Druyun decided to circumvent the rules."

In a statement yesterday, Boeing said Sears's plea reinforced "what we have said before -- that no Boeing executive other than Mr. Sears engaged in any wrongdoing in connection with Ms. Druyun's hiring."

Druyun earlier pleaded guilty to conspiracy, admitting that she negotiated the Boeing job while still overseeing the tanker deal. Last month, she was sentenced to nine months in prison after admitting that she had initially lied to prosecutors about the extent of her deceptions.

At her sentencing, Druyun admitted that she had approved excessive prices on contracts awarded to Boeing to enhance her job prospects with the company. Among other things, she said she had committed the Air Force to buying 100 airplanes from Boeing at an inflated price of about $20 billion as a "parting gift" before her Pentagon retirement.

Sears, an avionics engineer, spent 28 years at McDonnell Douglas Corp. before it was bought by Boeing in 1997. He then ran Boeing's multibillion-dollar military aircraft and missile defense unit until he was named chief financial officer in 2000, making him a likely successor to Philip M. Condit as Boeing's chief executive. Condit resigned a week after the company fired Sears and Druyun.

Court documents said Sears and Druyun tried to cover up their employment discussions, which began using Druyun's daughter, who also worked at Boeing, as an intermediary. Sears gave "misleading and evasive answers" to internal investigators and at one point, documents said, told Druyun to "hang tough.''

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