CORPORATE CRIME REPORTER
Lawyer: These Are Not Zip Codes
20 Corporate Crime Reporter 6(1), January 31, 2006
Enron’s Ken Lay and Jeffrey Skilling are at trial today in Houston.
Attorneys for WorldCom’s Bernie Ebbers were in New York City yesterday appealing his 25 year sentence.
These cases are among the many cases that have resulted from the work of President Bush’s Corporate Fraud Task Force.
Dedicated prosecutors seeking justice.
And the rap sheet produced by this task force has indeed been impressive.
In just over three years, Bush’s task force has brought criminal charges against more than 900 defendants.
More than 500 have been convicted.
And judges are beginning to hand down sentences that matter:
Adelphia’s John Rigas – 15 years
WorldCom Inc.'s Bernie Ebbers – 25 years
WorldCom’s Scott Sullivan – 5 years
Enron’s Andrew Fastow – 10 years
Rite Aid’s Martin Grass – 8 years
And the list goes on.
President Bush would have you believe that these are just a few rotten apples that is spoiling the market’s party.
But if only we could get a peek behind the corporate curtain, we’d see the extent of the rot.
Luckily, today we got a peek.
And it’s not Enron or WorldCom.
Someone at Boeing leaked to the Seattle Times a copy of a speech given by Boeing’s general counsel, Doug Bain, to a Boeing leadership meeting earlier this month in Tampa, Florida.
If only every general counsel would lay it out the way Bain laid it out earlier this month.
Then we might have a true picture of the extent of the corporate rot that faces us.
In the speech, Bain told his fellow executives that “there are some within the prosecutors' offices that believe that Boeing is rotten to the core.”
“They talk to us about pervasive misconduct and they describe it in geographic terms of spanning Cape Canaveral to Huntington Beach, to Orlando, to St. Louis to Chicago,” Bain said.
“They talk about it in terms of levels within the company that go from non-management engineers to the chief financial officer. Fortunately, not all prosecutors view us this way, but there are enough to make it difficult.”
According to Bain, federal prosecutors in Los Angeles are investigating a case of alleged theft of thousands of proprietary documents from rival Lockheed Martin.
In Virginia, federal prosecutors are looking at Boeing’s corporate complicity in hiring of the Air Force’s acquisitions chief.
Bain said that federal investigators are also looking at Boeing’s export of sensitive technologies.
To drive home the Virginia case, Bain held up two numbers 70040 and 47614.
“These are not ZIP codes,” he said. “These are the federal prisoner numbers for Mike Sears and Darleen Druyun.”
This is how Bain explained their crimes:
“On October 17, 2002, Mike Sears – then chief financial officer of Boeing – flew in a company airplane down here to Orlando and met with Darleen Druyun – then chief acquisitions officer for the Air Force – and offered her a job.
. . .
The question everyone keeps asking is, why?
The rules on dealing with government employees are not hard.
In fact, during the meeting Darleen told him – “I have not recused myself from Boeing business.”
As best we can figure out, Darleen told Mike in Orlando that she had just received a handshake offer, which she had accepted, from Lockheed Martin.
It's my personal belief that Mike then went into a sales mode. He not only wanted to make sure that he got Darleen – he wanted to make sure that Lockheed Martin did not.
The next day, Mike sent an e-mail that said "I had a 'non-meeting' with Darleen Druyun."
So, the cultural questions: How come nobody said to Mike, 'What in the hell do you mean by a non-meeting'? How come in the year 2000 nobody said, 'Should we really be hiring the relatives of our chief procurement officer for the largest customer we have on the defense side?'
It also raises the question, Do we have a culture of silence — don't ask the tough questions?
Prisoner 70040, Mike Sears, pled guilty to one felony count of aiding and abetting a violation of the conflict-of-interest laws.
He served four months in the federal correctional center in Oxford, Wisconsin.
He was released this past June 29.
In addition to serving hard time, he was fined $250,000. He was sentenced to community service and to two years of probation.
Also, when he was fired for cause, he forfeited approximately $5 million in equity-based compensation that was based on the then-current Boeing stock value of $39 per share.
Prisoner 47614, Darleen Druyun. Darleen pled guilty to one felony count of violation of the conflict-of-interest laws. She served nine months at the federal correctional center here in Marianna, Florida. She was released September 30.
One of the reasons that Darleen got a stronger sentence was that she lied to the prosecutors throughout the process.
She was fined $5,000 and sentenced to community service plus three years of probation.”
That was Doug Bain talking earlier this month.
The top lawyer at Boeing.
And it’s not just three major federal investigations.
Bain said that 15 Boeing company vice presidents have been pushed out for various acts of wrongdoing in recent years.
"I found that to be an astronomically high number," Bain said. “While only two of the 15 were separated for committing crimes, among the other issues we've had are expense-account fraud, travel abuse, violating our procedures for hiring consultants, abusive behavior, surfing the Net for porn, sexual harassment and retaliation.”
Bain said that Boeing’s Office of Ethics and Business Conduct has conducted hundreds of investigation in 2004 and 2005.
“What is astounding to me, of course, is that if you look at 2005, 900 of them were found to have substantiation,” he said.
Bain gave a gusty speech.
Whoever leaked the speech to the Times performed a public service.
That's because, as the speech makes clear, the rotten apples on trial in Houston don’t reflect the extent of the corporate rot eating away at the core of corporate America.
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