Last month the Seattle Times printed a leaked copy of a speech delivered by Boeing General Counsel Douglas Bain, to a meeting of Boeing muckety-mucks. It hasn't gotten as much attention in the media as it should, particularly given how much flak lawyers take for their role in client wrongdoing. This is an excellent example of the traditional ideal of the corporate lawyer, who not only counsels his or her client to comply with the law, but does so without any of the wishy-washy advising for which clients ridicule lawyers. The basic message of the speech is twofold: (1) Boeing has to stop making excuses for the various incidents that has gotten the company in trouble, and admit that some aspect of its corporate culture has to change, and (2) there are very serious risks for the company if it persists in trying to play games with regulatory requirements, instead of viewing its obligation as complying with the law.
Some excerpts from the speech follow the continuation of this post:
Regarding the attempt by Boeing to hire a procurement officer in the Air Force, in violation of federal government conflict-of-interest regulations:
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."
If this were all we were facing, we might have been able to deal with it better. But there were a lot of other events that came out. It turned out, in August 2002 Mike had had Darleen come to Chicago and even though the R word was never used, the prosecutors say 'This looks like a recruitment meeting.' So maybe the Oct. 17 conversation was not a one-off.
During the month of September, there was a string of e-mails between Mike and Darleen's daughter, who was employed as an HR person in St. Louis. The e-mails clearly are negotiations for Darleen coming to work for us.
* * *
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?
* * *
When we first met with the Department of Justice to see if we could resolve this, it's their view Boeing's actions have tainted the EELV contract, the NASA 19-pack contract [a 2002 contract for up to 19 Delta II rocket launches], and 27 Darleen Druyun-related contracts. Their estimate of damage is $5 billion to $10 billion.
I love the bit about "what the hell do you mean by a non-meeting?" That's exactly the sort of tough question that lawyers are supposed to ask -- it's fundamental to the role of corporate lawyers that they find out the truth and give candid advice. But you can't give candid advice if you accept your client's lame excuse for some obviously suspicious conduct. The idea of trying to hire Druyun was incredibly stupid. As Bain notes, the rules on dealing with government employees aren't hard. It's the job of lawyers to push back when their clients try to circumvent legal requirements.
As for the downside risks to Boeing, Bain points out that the State Department has essentially taken the view that Boeing is a rogue and should be penalized for selling restricted technology overseas without a license: "The State Department's view of Boeing is we just don't get it. There are too many violations, and as a result it's probably their intention to hammer us on QRS-11." The company lost $1 billion worth of launch business as a result of having stolen documents from Lockheed, a competitor in the space business. And Lockheed sued for a billion bucks or so, on top of the lost business. U.S. Attorney's offices in two jurisdictions are investigating the company for possible criminal violations.
Although I'm very impressed with this speech, and wish someone would give Bain a medal for acting like a real lawyer, it would have been awfully nice if this advice had been repeated up and down the corporate ladder at Boeing for the previous decade or so. By the time the general counsel of a major corporation gives this kind of "Come to Jesus" speech, it may be too late to reverse some of the cultural trends that created the problem.