Deal Breaker

On Oct. 17, 2002, Darleen Druyun, one of the Air Force's top acquisition executives, was a few weeks away from ending a remarkably successful 33-year career in the federal government when she met with a senior Boeing executive in a private conference room at the Orlando airport in Florida. He had flown in by private jet to see Druyun, who was already in town for a trade show conference and meetings about a NATO weapon system.

During the 30-minute meeting, Boeing Chief Financial Officer Michael Sears, offered Druyun a $250,000 annual salary and a $50,000 signing bonus to manage the company's missile defense programs. Druyun told Sears she already had a "handshake agreement" to work for rival Defense Department giant Lockheed Martin, and that she wasn't sure she would accept Boeing's deal. Nonetheless, the two discussed when she could start work and where a formal job offer could be sent. Druyun warned she had not yet disqualified herself from contract matters involving Boeing. They both agreed to keep the meeting between themselves.

"This meeting really didn't take place," Sears told Druyun at the conclusion.

Federal prosecutors unveiled details of that meeting in April as part of an investigation into the alleged cover-up of Sears and Druyun's talks, while she still was managing weapons contracts-including a proposed multibillion-dollar aircraft leasing deal between Boeing and the Air Force. In some instances, Druyun's daughter, Heather McKee, who works in Boeing's human resources department, acted as a go-between. On April 20, Druyun pleaded guilty to a single count of conspiracy in U.S. District Court in Alexandria, Va., and will cooperate with the continuing investigation. In exchange, she'll face no additional charges and her daughter will be immune from prosecution.

In August, Druyun, once one of the most powerful women in the Pentagon, will find out whether she will go to jail. Sentencing guidelines call for one to five years in prison with a possible fine of as much as $250,000. For now she's free on $25,000 bond. The impact of Druyun's agreement, however, extends well beyond the fate of the former senior executive. Her actions have raised questions about the acquisition reforms she championed, jeopardized a multibillion-dollar tanker lease deal, and renewed scrutiny of the "revolving door" that allows federal employees to work for government contractors.

Druyun made her mark in the government as a tough contract negotiator who pushed the limits of acquisition rules. As NASA's procurement chief, she promoted the space agency's "faster, better, cheaper" acquisition strategy. At the Air Force, she found herself in hot water over advancing payments to aircraft manufacturer McDonnell Douglas, now owned by Boeing, to keep the C-17 production line running. More recently, she initiated a series of contracting reforms, which she called "lightning bolts," that sought to cut costs and speed the fielding of weapons. The Air Force credited Druyun, who was the civilian equivalent of a three-star general, with saving billions of dollars through her reforms.

But Druyun's plea raises questions about changes to acquisition regulations in the 1990s, according to Angela Styles, former head of the Office of Federal Procurement Policy. "Acquisition reform created an environment where the rules didn't matter. If it said to do it in the [Federal Acquisition Regulation], then you were encouraged not to do it," she says. Styles, now a partner at Washington law firm Miller and Chevalier, believes Druyun applied that same mind-set to ethics rules.

Steven Kelman, a predecessor of Styles and an architect of procurement rule modifications, calls it "illogical" to link Druyun's ethical shortcomings with acquisition reform. There's no evidence that reformers are any more or less likely act unethically, he says. Kelman, a professor at Harvard University's John F. Kennedy School of Government, noted that Druyun's problem didn't stem from acquisition reform, but arose out of her work on the Boeing tanker deal, which runs counter to reform by leasing the planes under a sole-source contract.

Druyun simply made a mistake at the end of an otherwise successful career, says Terry Little, a veteran Defense weapons manager who viewed her as a mentor. "It's easy to look at this and say, 'Oh my gosh, you have this corrupt person.' I never saw any evidence of that," he says. At Druyun's request, Little recently wrote a letter praising her federal career to the federal judge overseeing the case.

Perhaps, the most controversial acquisition Druyun spearheaded came at the end of her career. In need of refueling aircraft and short on cash, the Air Force negotiated a $20 billion deal with Boeing to lease and eventually purchase 100 767 tanker planes. Critics, among them Sen. John McCain, R-Ariz., have called the deal a federal bailout for the aircraft manufacturer, which saw commercial aircraft sales fall after the Sept. 11 terrorist attacks. Defense Secretary Donald Rumsfeld has put the deal on hold pending the federal probe and other internal reviews.

McCain said in a prepared statement that the tanker lease deal may be "too tainted to go forward." Evidence uncovered by federal investigators shows, he says, that "a conspiracy to defraud the taxpayer and compromise the interests of the warfighter runs farther and deeper than originally expected." A Boeing spokesman contends the charges against Druyun are limited to conflicts about her hiring, not the company's tanker-lease program.

Druyun's guilty plea raises concerns about the hiring of former government workers by federal contractors. Several laws regulate the kind of work former federal workers can do and contacts they can have with their former agencies and employees. All federal workers receive annual ethics briefings on those rules. Top managers, like Druyun, also must disclose their financial holdings each year.

Druyun ran afoul of a federal law that prohibits government workers from taking any official action that could affect the financial performance of a company once they have sought employment there. Druyun did not disqualify herself from interacting with Boeing until Nov. 5, 2002, two weeks after she discussed a job with the company's CFO. In between, she was involved with the tanker lease.

Danielle Brian, executive director of the Project on Government Oversight (POGO), a private watchdog group in Washington, says Boeing has a history of hiring former top government officials. Between 1997 and 2003, POGO found, Boeing hired 11 former government executives, while four others, among them former Defense Secretary William Perry, were named to Boeing's board of directors.

Brian says new laws governing conflicts on interest are not needed, just better enforcement of those already on the books.

Druyun has declined requests for interviews. Her only public comment was a short, tearful statement to U.S. District Judge T.S. Ellis at her April hearing. "I would like to apologize for my actions, apologize to my family and to my nation," Druyun said as her daughter watched from the courtroom's front row.