A New Ethical Era for the Sleazy B?

Don't count on it.

Maybe Phil Condit didn't walk into a courtroom and plead guilty, then tender a company check to pay the criminal penalty, as one of his predecessors did. And it may ultimately have been a lack of confidence, not ethics, that forced the resignation of the Boeing chief executive officer and chairman this week. Either way, it's a narrow distinction. Corporate corruption is as much a part of Boeing's lore as the original Red Barnthe company's federal antitrust violations alone date to the 1930s.

Traditionally, lawbreaking was spread across the years and easily forgotten by shareholders when those fat dividends rolled in. In Condit's case, he wasn't paying attention to the calendar. Charges and accusations of "wrongdoing"crimepiled up under his watch, and in the wake of the commercial-airline decline after 9/11, there was a sense that the seven-year CEO wasn't cleaning up the messes, even symbolically, fast enough.

A slow return to better profitability couldn't override the ethical failures as one breach slopped over into another. It wasn't just the current Air Force tanker lease scandal, a potential $17-billion-plus deal that is now on hold pending yet another ethics review by the Pentagon. It wasn't just the firing last week of Chief Financial Officer Mike Sears and missile systems honcho Darleen Druyun for "misconduct" in connection with the tanker lease. It wasn't just the potential $1 billion loss of Air Force rocket business announced in July as a penalty against Boeing for possessing more than 25,000 pages of stolen military-satellite documents from rival Lockheed Martin, or the ongoing criminal probe and prosecution of two former Boeing employees for stealing or possessing the documentsor the four years of stonewalling over the return of those documents by Boeing, infuriating its ally, the Air Force. It wasn't just that a former Boeing scientist in July claimed that he was fired for blowing the whistle on a satellite division co-worker who possessed 8,800 pages of separate Lockheed internal documents. It wasn't just that the General Accounting Office earlier this year said proprietary information belonging to Raytheon, another competitor, was found in Boeing's offices. It wasn't just that in March a Boeing division that was part of McDonnell Douglas, which merged with Boeing in 1997, acknowledged making improper technology transfers to China in the 1990s. And it wasn't just that in the past five years under Condit, Boeing racked up more than $100 million in fines and settlements for federal violations.

It was all that, and more. Condit had a full plate and wasn't polishing it off. He resigned this week, he said, "as a way to put the distractions and controversies of the past year behind us." It may be his one damage-control ploy that helps. An apology here and there and a newspaper ad vowing to follow the rules weren't enough. Firing Sears and Druyun wasn't enough. Maybe even Condit's head isn't enough. More housecleaning is destined to follow. But if it's a new era at the Lazy B, history suggests it will not be permanent and that it occurred because there were no options.

THE TOPPLING OF Condit was mandatory once he became the Boeing poster boy for unethical and overindulgent behavior in a U.S. corporate era rampant with crime and, worse, lost revenues. Even his company turning a profit didn't stop Forbes from ranking Condit this year among the worstand most overpaidbosses in the U.S. He was in charge as Airbus stalked and is now surpassing Boeing for the commercial-airplane sales lead. Condit helped turn Boeing into mostly a war machineits defense work this year is expected to bring in $27 billion versus $22 billion in commercial-airplane sales. But scandal predominated: On Monday, Dec. 1, the day Condit was forced to resign, Boeing landed $69 million worth of Pentagon contracts, yet it was hardly worth mentioning after Secretary of Defense Donald Rumsfeld last week ordered a new review of the multibillion-dollar backroom tanker negotiations.

In this crushing atmosphere, Condit wasn't functioning; he couldn't brush aside corruption allegations like the chairmen of old. In 1982, then-chair T.A. Wilson strolled into federal court, entered a guilty plea on criminal charges that Boeing failed to disclose millions in "irregular commissions" (payoffs) related to the sales of commercial airliners overseas, handed over a $450,000 check, and strolled out. In 1989, Boeing admitted to trafficking in classified Pentagon documents and paid a $5 million criminal penalty. As prosecutors, shareholders, and company officials understood, that was the cost of doing business. Just don't do it too often. Don't get too arrogant. And don't throw it in the nation's face, as Condit, in what was perhaps his first big mistake, did in 2000. Desperate to obtain a favorable China trade vote, he announced in D.C. that Boeing "will be supporting people [politicians] that believe in the direction we do." To some, it was the biggest payoff offer of all time: a bribe to all of Congress.

A week ago, when Sears and Druyun were forced out, Condit did the honors. There was "compelling evidence" of their misconduct, he said. Sears was quick to suggest that he had been compelled only to follow orders, albeit failing the one about not getting caught. The two-exec sacrifice wasn't sellingCondit said the company only recently discovered the alleged wrongdoing, yet Boeing had possession of damning e-mails since 2001 outlining the insider help it was getting from its future exec Druyun, then a top Pentagon acquisitions officer. From a Boeing internal e-mail: "Darleen will make the actual contract favorable and is willing to go to the [financial] market with us to stress the low risk involved in such a lease. . . . " Boeing couldn't be trusted anymore even to tell a good lie. The tempo turned up on the long drumbeat for Condit's head. By Monday, the board of directors was dancing to it, announcing that a "new structure for the leadership . . . was needed to restore the company's reputation." It sounded encouraging. But the question remains: reputation for what?


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