09 Nov 04. A federal investigation of Boeing Co.’s dealing with the U.S. Air Force has expanded to include the $100bn Future Combat System program it oversees for the Army, according to a report published Tuesday.

The criminal probe by the U.S. Attorney’s Office in Alexandria, Va., and the Pentagon’s Defense Criminal Investigative Service is in its early stages, the Wall Street Journal reported in its online edition, citing unnamed people familiar with the matter. The federal investigative agencies declined comment, the Journal said. A Boeing (BA: news, chart, profile) spokesman, Douglas Kennett, said he wasn’t aware of the new investigation, the Journal said.

The expanded inquiry is likely to lead to further Pentagon and congressional scrutiny of the troubled aircraft maker, according to the Journal.

According to the Journal, the investigation involves Michael Sears, Boeing’s former chief financial officer. Sears was a key player in a scandal involving Boeing’s hiring of Darleen Druyun, a former high ranking Air Force executive who in October admitted to improperly favoring Boeing in a number of procurement contracts she oversaw, the Journal said. Sears and Druyun were fired in 2003 for lying about their job discussions, the Journal reported. Sears is set to plead guilty next week to aiding and abetting. Druyun’s conflict-of-interest violations, according to the Journal. According to the Journal report, Sears didn’t negotiate the FCS contract, but he did discuss important cost-allocation matters with senior Army officials. Federal investigators recently began looking into contacts last year between Sears and Claude Bolton, the Army’s chief acquisition official, over increases in Boeing overhead rates passed on to Army aviation programs, the Journal said. The talks came before Boeing and the Army settled on financial terms of the FCS contract, at a time when Pentagon auditors were raising questions about certain cost and overhead issues, according to the Journal.