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PENTAGON PROBES HIRING OF DEFENSE OFFICIALS

12 Jan 04. Prompted by a string of ethical problems at Boeing Co. (NYSE:BA – News), the Defense Department has launched a broad examination of high-level military officials hired away by various major defense contractors over the past few years, people familiar with the details told The Wall Street Journal.

Led by the Pentagon inspector general’s office, the inquiry is expected to focus on Boeing initially but then expand quickly to look at the hiring practices of other big military suppliers, these people said. The government’s move could focus particularly on big defense contractors that tend to hire former government officials, including Lockheed Martin Corp. (NYSE:LMT – News) and Carlyle Group. Government investigators could then turn their attention to the dozens of smaller but important parts suppliers the Pentagon depends upon.

The government’s effort is still in its preliminary stages as it develops its strategy. But the move shows the government’s intention to step up scrutiny of a longstanding practice within the defense industry. It also shows that the waves created by the spate of government investigations involving Boeing – which already have cost the Chicago aerospace company dearly in terms of stripped contracts and a tarnished image – are beginning to lap at others in the industry.

The inquiry stems from the continuing criminal probe of allegedly improper dealings between Michael Sears, Boeing’s former chief financial officer, and Darleen Druyun, a former senior Pentagon acquisition official who oversaw certain Boeing contracts prior to joining the company. Boeing fired both executives in November, accusing them of attempting to conceal Mr. Sears’s contacts with Ms. Druyun over her job at the company before Ms. Druyun had disqualified herself from Boeing-related matters. No other individuals have been accused of wrongdoing. The U.S. attorney’s office in St. Louis declined to comment, as did a Boeing spokesman.

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