The Multinational Monitor


April 2004 - VOLUME 25 - NUMBER 4

T H E    F R O N T

Plea in Boeing Scandal

Darleen A. Druyun, the former Pentagon and Boeing employee, pled guilty in April to negotiating an employment deal with Boeing while still working with the Pentagon on a Boeing contract.

Druyun pled guilty to a one count criminal information charging conspiracy to commit acts affecting a personal financial interest by negotiating employment.

Druyun, who will be sentenced on August 6, 2004, could receive a maximum sentence of 5 years in prison and a $250,000 fine.

Boeing Senior Vice President and General Counsel Doug Bain says the Druyun guilty plea was the result of the company "voluntarily reporting unethical conduct to the U.S. Attorney and other government agencies last November."

"At that time, Boeing dismissed Ms. Druyun and another executive involved in her hiring after an internal company investigation revealed that they had violated ethical practices," Bain says. "Boeing immediately brought this matter to the attention of the U.S. Attorney, the Department of Defense Inspector General and the U.S. Air Force."

Druyun was the principal deputy assistant secretary of the Air Force for acquisition and management from 1993 until her retirement in November 2002.

In that position, she supervised, directed and oversaw the management of Air Force acquisition programs.

This included negotiations in 2002 with the Boeing Company to lease 100 KC 767A tanker aircraft, used for refueling planes while they are in flight, for the Air Force.

The total value of this contract was projected to be in the range of $20 billion.

Federal officials alleged that from September 23, 2002 until November 5, 2002, Druyun participated "personally and substantially" as a government employee overseeing the negotiation of the lease from Boeing while she was at the same time negotiating prospective employment with a senior executive of the Boeing Company.

As a result of those negotiations, she accepted a position in January 2003 as vice president and deputy general manager of the Missile Defense Systems, a business unit of Boeing Integrated Defense Systems.

Druyun's daughter, herself an employee of the Boeing Company, contacted a senior executive of Boeing in September 2002.

(The statement of facts accompanying Druyun's plea indicates that Druyun had previously contacted a Boeing executive to obtain employment for her daughter's boyfriend. Boeing hired the boyfriend.)

In a series of e-mails, the daughter outlined to the senior executive her mother's intention to retire from the Air Force and the type of position her mother would accept after retirement.

Druyun discussed these e-mails with the daughter, who relayed Druyun's interest in Boeing employment and a meeting with the senior executive.

As a result, the senior Boeing executive and Druyun met in a private conference room at the General Aviation Terminal of Orlando Airport on October 17, 2002.

Although both parties at the meeting were aware that Druyun had not disqualified herself from matters involving Boeing, they discussed terms of employment.

This included discussions of a specific Boeing position, salary, bonus and starting date.

At the conclusion of the meeting, the senior executive advised Druyun that, "This meeting really didn't take place." Druyun did not disqualify herself from matters involving Boeing until November 5, 2002.

In summer 2003, Boeing retained outside counsel to review the hiring of Druyun after news reports questioned the propriety of her hiring by the company.

Druyun and the senior executive agreed to maintain a false story that their first discussion of potential employment occurred on November 5, 2002, after she disqualified herself from acting on matters involving Boeing.

The senior executive urged Druyun to "hang tough" in a series of phone conversations, including a conversation which occurred after the initiation of a criminal investigation by the Department of Defense Inspector General.

Druyun was terminated by Boeing for cause on November 24, 2003.

"At a time when the government is straining to fulfill its responsibilities with limited resources, it is critical that public officials act with honesty and integrity," says U.S. Attorney Paul McNulty in Alexandria, Virginia.

"There can be no conflict of interest," says McNulty. "The only interest should be the public's interest. Darleen Druyun placed her personal interest over the interests of the Air Force and American taxpayers. Secretly negotiating employment with a government contractor, at the same time you are overseeing the negotiations of a multi-billion dollar lease from that same contractor, strikes at the heart of the integrity of the acquisition process."

The tanker contract on which Druyun worked has been among the most controversial Pentagon contracts this side of Halliburton.

The deal involves planes that analysts charge the Air Force does not need.

Most controversially, the contract is for a lease of the planes, rather than outright purchase. The long-term cost to the government with a lease is more than a purchase would be.

This fact has made the Boeing deal a lightening rod for groups across the political spectrum concerned with corporate welfare. Publicity around the case has generated opposition in Congress -- offsetting in part Boeing's strong support among Members of Congress in whose states or districts the company maintains operations. As a result, the deal has been slimmed down from $100 billion to $20 billion.

Boeing has gone to great pains to insist that Druyun's plea should not shed a bad light on the tanker deal.

"It is important to note the [Druyun charge] relates to conflict-of-interest in Ms. Druyun's hiring and is not related to Boeing business, its financial performance or the 767 Tanker program," says Boeing's Bain.

But critics of the Boeing contract say evidence is mounting that the deal is, plain and simple, a taxpayer ripoff.

In April, the Pentagon's Inspector General issued a report sharply critical of the deal.

"From the beginning, this has been a tail wagging the dog scenario," says Eric Miller, senior defense investigator of the Washington, D.C.-based Project On Government Oversight. "The Inspector General's report showed that the specifications for the tankers were tailored to match the contractor's product, and not the Air Force's needs. The investigation also showed that the tanker lease deal is laced with provisions that will remove critical transparency in contracting and other taxpayer protections."

"The Air Force hasn't yet justified the need for the tankers, nor has it provided convincing evidence that it's the best financial deal for the taxpayers," Miller says.

-- Robert Weissman

Sri Lanka Labor Struggles

Colombo, Sri Lanka -- Kamala Sundari, 25, is pregnant and wonders what she'll do once the baby arrives. She was hired a year ago as a casual worker in a garment washing plant. Although she works hard, she knows that once she walks out the door to deliver the baby, she will lose her job.

"The pay is not very good, but it is still a job," Sundari says. She and her husband earn just enough to stay out of debt. "If I lose this job after the baby, I don't know how we will manage."

Sundari is not aware that her boss is breaking the law by employing her as a casual worker. And there's no union at the washing plant to tell her that. Sundari's experience is not unusual for women in Sri Lanka, despite its strong history in trade unionism. Sectors such as the garment industry that employ most women are also the ones that side-step labor laws -- and earn most of Sri Lanka's foreign exchange.

The garment industry generates about $3 billion a year -- in 2001 it accounted for half of Sri Lanka's foreign exchange earnings -- and 90 percent of its employees are women. But there is hardly any organized voice to lobby for rights and benefits or protest against unfair treatment.

Now the government, the domestic private sector, foreign investors and donors are joining hands to try and push through legislative changes that would create a more "flexible" labor market so workers can be more easily hired and fired.

Women, already in a weakened position, are likely to suffer the most.

The ideas are encapsulated in the country's strategy to reduce poverty, chiefly by stimulating economic growth.

The Poverty Reduction Strategy Paper (PRSP), written by the government in consultation with civil society, must be approved by the International Monetary Fund (IMF) and World Bank for poor countries to qualify for aid and debt relief. Over 45 other developing countries are going through such a process, and many of them are incorporating similar recommendations.

Sri Lanka's strategy paper argues that without such changes it will be difficult to attract foreign investors, make business more competitive and create the two million jobs a year needed to absorb the labor surplus.

By 2001, the IMF had already made labor law reforms a condition for financial assistance. Despite Sri Lanka's 20-year record of steady economic growth -- an average of 2.9 percent a year -- and strong progress in health, literacy and life expectancy, a 20-year civil war has left it in financial straits, forcing subsequent governments to agree to donor demands.

Existing labor laws are commonly believed to favor workers, allowing the Commissioner of Labor, a bureaucrat, to dictate terms and issue decrees to any employer on any labor dispute.

Changes are sought in the TEWA (Termination of Employment of Workmen Act) and IDA (Industrial Disputes Act) -- primarily to facilitate a hire-and-fire policy and speedy resolution to labor disputes, known to cripple services and drive companies over the brink.

Many of the amendments are still in a draft stage and hotly disputed by trade unions. The main opposition party, the Marxist People's Liberation Front (JVP), the key party in the coalition that won a majority of seats in April's parliamentary elections, also vehemently opposes them.

Some changes, however, were passed in December 2003 -- to cut redundancy payment and extend women's overtime limit from 100 to 720 hours a year, allowing factories to impose longer working hours on female staff.

But the private sector wants more. "We still need the consent of the worker to implement overtime. To be competitive, we need at least a couple of hours a day compulsory overtime. This is crucial," says Ravi Pieris, vice president of the Employers' Federation of Sri Lanka.

"The changes to the Termination Act are not sufficient. We need to be more flexible and not need to liaise with the Commissioner of Labor for every small decision."

Industrialists say these changes are the best way to increase productivity and competitiveness, predicting that increasing rivalry from Bangladesh, China and Vietnam will result in the closure of half of Sri Lanka's 800 garment factories by the end of 2005.

Opponents fear the amendments will lead to a sharp rise in joblessness, with little expectation of unemployment benefits, until the promised new jobs actually appear.

Women, who make up a third of the workforce, will fare worse than men. For one, female unemployment is already higher -- 11.5 percent compared to 6 percent among males. With more women seeking work, businesses find it easier to fire and hire new female labor, especially the semi- and non-skilled workers who are common in the garment industry.

In addition, most of the women employed in garment factories are in their early twenties and unmarried: employers exploit their youth, inexperience and women's general low status in society to impose unfair strictures.

This is a problem across Asia. Fewer than half the women in Bangladesh's garment factories have a contract and most receive no maternity or health coverage. In China, young women face 150 hours of overtime each month.

Underlying all this is lack of union representation.

"Women are less inclined to form trade unions and participate in their work, perhaps because their spouses or parents object to such activity," says Nimal Pathirana of the Ceylon Mercantile Industrial General Workers Union.

In Sri Lanka's Free Trade Zones, where many of the garment factories are located, entrance is restricted to those who have passes. "So there can be little influence from larger trade unions and also little inspection from labor department officials," says Pathirana.

Against this background, labor reforms are likely to create even more uncertainty for women workers, despite their enormous contribution to the economy. "Female factory workers are generally unaware of their rights and do not speak up. They may even be cheated out of the correct compensation package," says Pathirana.

Some experts question just how effective the reforms will be in reducing poverty in the long run. According to Professor Swarna Jayaweera of the Center for Women's Research, "previous donor-insisted reforms have not resulted in sustained economic growth in Sri Lanka." They have also ignored the impact of reforms on women.

Coen Kompier, a New Delhi-based specialist in South Asian labor standards at the International Labor Organization, says there are other -- and better -- ways to improve productivity: such as training staff, encouraging dialogue between workers and employers so that disputes are resolved quickly, and improving safety in the workplace.

And rather than compete with Bangladesh, China and Vietnam in making cheap clothes, he says Sri Lanka could consider producing higher quality clothes.

The prospects of reforms is now uncertain in the wake of tightly contested April elections that gave a leftist coalition control of the government. The new government is less pro-business than its predecessor, and will be less inclined to weaken the labor laws.

-- Tharuka Dissanaike is a Sri Lankan journalist and former features editor of the Sunday Observer.