Contract and procurement fraud can be especially enticing to those seeking to line their pockets at the expense of taxpayers and military personnel. Here are some lessons we can learn from the crimes of the "Dragon Lady."
Darleen Druyun was regarded as one of the toughest contract negotiators in the federal government. She also had a reputation as one of the toughest managers to work for in the Pentagon. But in the end, Darleen Druyun was nothing more than a convicted felon.
She was, by all accounts, a successful civil servant. Druyun had held several senior executive positions at various government agencies, including the Office of Management and Budget (OMB) and NASA. From 1992 to 1993, she ran the day-to-day operations as its chief of staff.1 It was in the height of her career - as principal deputy assistant secretary of the Air Force for acquisitions and management - that she fell fast.
On April 20, 2004, Druyun pled guilty in U.S. federal court to a single count of conspiracy. She was charged with conspiracy, "... knowingly, intentionally and willfully [participating] personally and substantially as a government employee ... in a contract ... in which to her knowledge [of] the Boeing Company, a company with whom she was negotiating concerning prospective employment, had a financial interest in violation of Title 18, United States Code, Section 208(a) and 216(a)(2)."2
All in the family
In 2000, Druyun had arranged for her daughter and future son-in-law to be hired by Boeing through an associate in the company. A few years later, through a series of e-mails from her daughter to the associate (by then the company's CFO), the daughter told the CFO that her mother would soon be retiring from her government job and was looking for a private-sector position. This exchange was going on while Druyun had already agreed to work for Boeing's main competitor, Lockheed Martin.
Following is one of their e-mail exchanges:
CFO: I met with your mom last week. She informed me of her plans and I suggested that we chat. She said she needed to wait until she got some of our work completed before she could chat with me. Did I miss a signal or have the wrong picture? I'm with you...we need to be on her menu!
Daughter: Oh! I think she is referring to [Boeing's impending Tanker Leasing contract]...might be too much of a conflict right now. She hopes to have the tanker deal made or scrapped by early Dec[ember]...maybe she has to wait for that long before approaching us. It still makes me very worried that she is talking to Lockheed!...3
In violation of federal law regarding post-government employment, Druyun and the CFO met in a private room at the Orlando Airport in mid-October 2002. There she told him that she hadn't recused herself from any Boeing business before the Air Force. This didn't stop the CFO and he continued to discuss her potential employment options at the company. After the meeting, the CFO told Druyun, "this meeting really didn't take place," and wrote an e-mail to a number of senior Boeing officials:
CFO: ...had a "non-meeting" yesterday re: hiring [Boeing's missile system business's] deputy. Good reception to job, location, salary, longer-term outlook. Recommend we put together formal offer...
Despite Druyun's employment talk with Boeing, she didn't recuse herself until 18 days after the meeting. Both prior to and after her knowledge of impending employment discussions with Boeing, she continued to participate "personally and substantially" (as the court filing states) in negotiations, meetings, and strategy sessions regarding the Boeing Tanker deal, until her retirement from the Air Force in December 2002. She joined Boeing a few weeks later.
Questions arise
In 2003, after Druyun had been employed at Boeing for more than six months, newspaper reports began to surface questioning the legitimacy of the deals between the Air Force and Boeing. Attention soon focused on Druyun and her role as chief negotiator. At Boeing, she began to get nervous after being contacted by a lawyer conducting an internal investigation for the company. She wrote the CFO in an e-mail:
Druyun: I have an appointment on Monday with [the lawyer]...I wanted to reverify my recollection of our first discussion of potential employment. You came to see me on [the day she "officially" recused herself]...As I recall...you lectured me about not jumping at my first job offer because I mentioned that I believed I had a verbal agreement with [Lockheed]... I see [the lawyer] at 0900 Monday AM and wanted to verify with you that this was also as you remember it...
Druyun lied to the lawyer in the interview and knew her e-mail to the CFO contained intentionally falsified information and didn't represent what had really transpired. The whole affair began to unravel when the lawyer confronted Druyun about her inconsistencies.
After her cooperation and plea deal, federal agents debriefing her soon discovered it wasn't just this single employment issue. They concluded Darleen Druyun, once called "Dragon Lady" by her staff, had actually been lending Boeing a helping hand for quite some time.
In interviews with federal investigators, Druyun admitted to providing false and misleading statements in her previous meetings with agents after her plea. In a fall 2004 court filing, U.S. Attorney for the Eastern District of Virginia Paul McNulty and Assistant U.S. Attorney Robert Wiechering wrote: "[Druyun] ... now acknowledges that she did favor the Boeing Company in certain negotiations as a result of her employment negotiations and other favors provided by Boeing. ..." Her accomplice, Boeing CFO Michael Sears (who had met her in the Orlando airport and corresponded with her in the e-mails), was also charged, pled guilty, and was sentenced. Druyun was sentenced to nine months in federal prison, a $5,000 fine, three years of probation, and 150 hours of community service. She was released from prison Sept. 30, 2005. Sears pled guilty to one felony count of aiding and abetting a violation of the conflict-of-interest laws. His sentence was four months in federal prison, a $250,000 fine, two years of probation, and 200 hours of community service. He was released from prison June 29, 2005.
Since their sentencing, McNulty, the U.S. Attorney for the Eastern District of Virginia, has created a procurement fraud working group consisting of the FBI; Defense Criminal Investigative Service; Naval Criminal Investigative Service; and Inspectors General from the National Reconnaissance Office and Departments of Transportation, State, and Homeland Security to help combat this increasingly publicized crime. The group's members vet cases and investigations; train investigators and auditors; increase collaboration; and educate government personnel on how to detect, prevent, and investigate potential contract fraud.4 More collaborative initiatives like this will enhance the quality of investigations and productivity of those investigative agencies
involved.
Lessons learned
Darleen Druyun's case illustrates the continued profitability of government contract and procurement fraud. Certified Fraud Examiners, auditors, investigators, managers, and executives can learn a lot from this case.
Contracting operations still extremely vulnerable to fraud
Contract and procurement fraud can be especially enticing to those seeking to line their pockets at the expense of taxpayers and the lives of military personnel especially since the creation of the Department of Homeland Security and the tremendous increase in military spending on the war on terrorism. As noted by the Defense Department Inspector General in the April 2005 to September 2005 Semiannual Report to Congress, "The Department of Defense is the world's largest purchaser of goods and services. In FY 2004 alone, DoD spent $254 billion on acquisition. On an average working day, DoD issues more than 25,000 contract actions, valued at $923 million, and makes more than 195,000 credit card transactions, valued at $43.9 million. There are about 1,500 weapon acquisition programs valued at $2.2 trillion over the collective lives of these programs." For a period in the late 1990s, the federal government didn't seem to emphasize searching for fraud in contracting entities. As professionals seeking to prevent, uncover, or deal with the after affects of fraud, we must be ever watchful.
Supervision and oversight are still the most effective deterrent
Darleen Druyun was given a position of nearly unlimited and unchecked authority. Her boss, Dr. Marvin Sambur, the Air Force's assistant secretary of acquisition, told the Defense Writer's Group that Druyun "... had too much power ..." and she "had no oversight because there was nobody confirmed [in the assistant secretary's post] for 50 percent of the time ..." Sambur and former Air Force Secretary Dr. James Roche were under congressional scrutiny for their involvement in the Boeing lease for tankers; both resigned within days of each other in November 2004. Roche was investigated for his misuse of public office in helping to arrange the employment of an acquaintance at a defense contractor where he was formerly an executive. He was found culpable but no further action was taken.5
Proper internal controls demand significant and crucial oversight. Without the simple act of questioning her decisions or allowing her subordinates to expose potential problems and conflicts, Druyun's supervisors (when she had them) were unable to gain a complete or accurate picture of what she was doing. This fault truly lies equally on the White House, Congress, and senior Defense Department executives.
Employee awareness can help resolve cases before they become 'disasters'
The use of a "hotline" or other anonymous reporting mechanism could have enabled criminal investigators or the Department of Defense inspector general to follow up on allegations of inappropriate behavior she exhibited, especially with subordinates. The red flag was her management style; published reports contained the following examples:
Conflicts of interest with family must be addressed
U.S. federal regulations prohibit government employees from conducting post-government service employment inquiries while still in office, but the regulations do not cover the civil servant's immediate family members. In Darleen Druyun's case, she only became involved in this mess while trying to lobby Boeing on behalf of her daughter and future son-in-law.
Incidentally, Druyun, according to the U.S. Attorney for the Eastern District of Virginia, after her third post-plea interview with federal agents, "also acknowledge[d] contacting ... Boeing in 2002 about the continued employment of her daughter." The footnote in court papers continues:
The defendant had been told by her daughter that she feared termination by Boeing for employment performance issues. The defendant contacted a senior official of Boeing, with whom she was negotiating the KC 767A tanker lease, to prevent any adverse action by Boeing against her daughter. The daughter was not terminated and instead transferred to a new position. This same senior Boeing official routinely updated the defendant concerning the daughter's employment with Boeing, for example advising the defendant of pay increases received by the daughter. 8
While no one suspects Druyan's husband, William, of any wrongdoing, he's a former Air Force official and worked for General Dynamics Corporation, a Boeing competitor. He retired from General Dynamics in 2004.9
This practice simply alarms an already skeptical public about the ability of our government to deal with these transactions in a transparent and ethical manner. While some disagree with the need for further regulation of "non-involved" family members, it's clear from this case that Darleen Druyun was beholden to Boeing and didn't clearly separate herself from dealings with them.
Relationships between government officials and private industry must be closely monitored
It's clear Druyun broke the law for one reason: money. The problem is that many government agencies don't pay competitive salaries when compared to the sums earned by corporate employees. It's difficult to put in place well-meaning and enforceable rules that can guide a government worker's post-retirement employment.
"The military and industry get together to generate requirements [for products or services] that may or may not be valid, and they award contracts in the best interest of the company as opposed to the country," says Lawrence Korb, a former Department of Defense official in a Chicago Tribune report.10
One of the issues seems to be the crossover of employees from the public sector to the private sector. While many employees aren't likely to commit fraud, the private sector must maintain integrity in hiring and background checks; otherwise, the company will be liable for an incident like the Druyun affair. Even defense contractors get the message. One spokesman for a major defense outfit said, "all of us in the defense industry benefit from having a process of integrity..."11
The Darleen Druyun case exemplifies the need for continued and increased oversight, training, investigation, and prosecution of procurement fraud. As professionals committed to keeping the integrity in the process of purchasing and contracting, we must recognize that more must be done to ensure that education, investigation and monitoring persists. Procurement fraud eats up valuable (and scarce) resources and hurts the American taxpayer.
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