The Defense Industry Initiative on Business Ethics and Conduct An Overview Promoting a culture of ethical conduct within the defense industry

Through the mid 1970’s A&D industry largely unregulated –Internally or externally Foreign bribery was not illegal –And was practiced universally –Bribes were “admission to a ballgame” Contract overruns were commonplace First whispers of exorbitant costs –$600 toilet seats –$2,000 pliers The Background Wild West ‘Anything Goes’ Mentality

“Subcommittee on Multinationals” –Convened in 1975 –Chaired by Senator Frank Church Convened post-Watergate –Looking at political involvement in CREEP Quickly moved to international influence CEOs said they’d modeled their sales programs on one another Worldwide inquiries followed Church Committee Widespread Public Perception of Corruption Starts

Foreign Corrupt Practices Act Passed in 1975 Amended in 1988 and in 1998 Bribery of foreign officials now against U.S. law FCPA Foreign Bribery Now Illegal

Felony prosecutions of A&D companies Half of Pentagon’s top 100 suppliers under criminal investigation Cases so egregious, President Reagan’s Justice Department mobilized Mid 80’s Corruption

Launched by FBI Investigating corruption by U.S. Government, military officials, and defense contractors Uncovered most blatant graft in higher reaches of USG since Teapot Dome scandals of the 1920’s Cozy relationships; web of favors, secret deals, and outright bribery Convictions to an ASN, DASN, and a DASAF Led to the Procurement Integrity Act ‘Bad Apple’ defense popularized Operation Ill Wind Rampant Corruption and Graft

Formed 1985 by President Reagan as President's Blue Ribbon Commission on Defense Chaired by David Packard, former Deputy Secretary of Defense Established to reduce inefficiencies in the defense procurement system Recommended, among other things, changing the organizational culture The Commission urged defense contractors to improve the defense acquisition process through greater self-governance Packard Commission The Solution is Within the Culture

“To assure that their houses are in order, defense contractors must promulgate and vigilantly enforce codes of ethics that address the unique problems and procedures incident to defense procurement.” “They must also develop and implement internal controls to monitor these codes of ethics and sensitive aspects of contract compliance.” From the Report

‘75‘76‘77‘81‘80‘79‘78‘82‘83‘84 Big Picture ‘85‘86 Subcommittee on Multinationals Subcommittee on Multinationals DII Formed DII Formed Operation Ill Wind Operation Ill Wind Packard Commission Packard Commission Declining Public Trust FCPA Passed FCPA Passed

Enter DII Jack Welch of General Electric and the CEOs and senior officials of 17 other defense contractors voluntarily met Created the Defense Industry Initiative on Business Ethics and Conduct. Drafted the principles that became central to the DII. These principles first appeared in the Appendix to the Packard Commission's June 1986 final report By July 1986, 32 major defense contractors had pledged to adopt DII’s core principles.

1)Have and adhere to written Codes of Conduct; 2)Train employees in those Codes; 3)Encourage internal reporting of violations of the Code, within an atmosphere free of fear of retribution; 4)Practice self-governance through the implementation of systems to monitor compliance with federal procurement laws and the adoption of procedures for voluntary disclosure of violations to the appropriate authorities; 5)Share with other firms their best practices in implementing the principles, and participate annually in “Best Practices Forums”; and 6)Be accountable to the public. Original DII Principles Commitments, Not Best Efforts

Aeronca Inc. Allied-Signal, Inc. American Telephone & Telegraph Co. The Boeing Company Burroughs Corporation E-Systems, Inc. Eaton Corp. FMC Corporation Ford Aerospace & Communications Corp General Dynamics Corporation General Electric Company Goodyear Aerospace Corporation Grumman Corporation Hercules Incorporated Hewlett-Packard Company Honeywell Inc. Hughes Aircraft Co. IBM Corporation Lockheed Corporation Martin Marietta Corporation McDonnell Douglas Corporation Northrop Corporation Parker Hannifin Corporation PneumoAbex Corporation Raytheon Company Rockwell International Corp. The Singer Company Sperry Corporation TRW Inc. Textron Inc. United Technologies Corporation Westinghouse Electric Corporation Original DII Signatories

DII is a nonpartisan, non-profit association of responsible U.S. defense companies –Committed to conducting business affairs at the highest ethical level and in full compliance with the law –Our members are the professional ethics officers, CEOs and senior officials of 81 top defense companies serving the United States military DII provides resources and assistance to help train hundreds of thousands of defense-industry employees in ethics and compliance. DII holds regular meetings and conferences to share best practices DII mentors suppliers and new firms in how to comply with the laws and regulations that govern U.S. defense companies. Who We Are Today

The DII Principles were updated in November 2013: We, the members of the Defense Industry Initiative on Business Ethics & Conduct (DII), affirm our commitment to uphold the highest ethical standards in all our business dealings with the government, as expressed through the following principles: 1)We shall act honestly in all business dealings with the U.S. government, protect taxpayer resources, and provide high- quality products and services for the men and women of the U.S. Armed Forces. 2)We shall promote the highest ethical values as expressed in our written codes of business conduct, nurture an ethical culture through communications, training, and other means, and comply with and honor all governing laws and regulations. The DII Principles Today

3)We shall establish and sustain effective business ethics and compliance programs that reflect our commitment to self- governance, and shall encourage employees to report suspected misconduct, forbid retaliation for such reporting, and ensure the existence of a process for mandatory and voluntary disclosures of violations of relevant laws and regulations. 4)We shall share best practices with respect to business ethics and compliance, and participate in the annual DII Best Practices Forum. 5)We shall be accountable to the public, through regular sharing and reporting of signatory activities in public fora, including These reports will describe members’ efforts to build and sustain a strong culture of business ethics and compliance. The DII Principles Today

DII Steering Committee: The DII is governed by a Steering committee, a policy-making body comprised of prominent defense industry CEOs DII Working Group: The DII Working Group are volunteers, comprised of one representative from each Steering Committee organization, who direct the activities of the DII DII Leadership

DII Steering Committee Chair Anthony Moraco Chief Executive Officer Science Applications International Corporation DII Working Group Chair Laura Kennedy Chief Ethics Officer Science Applications International Corporation DII Coordinator Angela B. Styles Partner Crowell & Moring LLP DII Leadership

DII Steering Committee Anthony J. Moraco Chair, DII Steering Committee Chief Executive Officer Science Applications International Corporation William M. Brown Chairman, President & Chief Executive Officer Harris Corporation Wes Bush Chairman, CEO & President Northrop Grumman Corporation Christopher M. Chadwick Executive Vice President, The Boeing Company President and Chief Executive Officer Boeing Defense, Space & Security Scott C. Donnelly Chairman of the Board & Chief Executive Officer Textron Inc. Jerry DeMuro President & Chief Executive Officer BAE Systems, Inc. Gregory Hayes Chief Executive Officer United Technologies Corporation Marillyn A. Hewson Chairman, President & Chief Executive Officer Lockheed Martin Corporation David L. Joyce President & CEO, GE Aviation General Electric Company Thomas A. Kennedy Chief Executive Officer Raytheon Company Michael Madsen President, Defense and Space Honeywell International Inc. Phebe N. Novakovic Chairman & Chief Executive Officer General Dynamics Corporation Robert (Kelly) Ortberg Chief Executive Officer & President Rockwell Collins Steve Tough President, Government Programs Health Net Federal Services Harold L. Yoh III Chairman & Chief Executive Officer The Day & Zimmermann Group, Inc.

Laura Kennedy Chair, DII Working Group Chief Ethics Officer SAIC Melisse Ader-Duncan Associate General Counsel Textron Systems Corporation Jamal Ahmed Vice President, Internal Audit & Chief Ethics Officer Day and Zimmermann Sandra Evers-Manly Vice President, Global Corporate Responsibility Northrop Grumman Corporation David Feniger Vice President and Assistant General Counsel Health Net Federal Services Eric Kantor Deputy General Counsel & Chief Compliance Officer GE Aviation Legal Operation Denise King Director, Business Conduct Harris Corporation Leo S. Mackay Vice President, Ethics & Sustainability Lockheed Martin Corporation DII Working Group Dorene MacVey Senior Director, Ethics & Business Compliance Rockwell Collins Ellen Martin Vice President, Ethics and Business Conduct The Boeing Company La Guardia Myers Staff Vice President, Ethics General Dynamics Corporation Douglas Perry Vice President, Global Compliance Honeywell Nick Ruscio Vice President, Internal Audit and Chief Ethics Officer BAE Systems, Inc. Tim Schultz Chief Ethics Officer Raytheon Corporation Noelle S. Slifka Associate General Counsel, Government Contracts United Technologies Corporation Angela Styles DII Coordinator Partner Crowell & Moring LLP

Current Members – 81 Signatories New Member Companies Since Last BPF –Decypher Technologies Ltd. –Delex Systems –Elbit Systems of America –Intel Federal LLC –ManTech International Corp. –Mission Essential Personnel –Quantech Services, Inc. –USIS Investigative Services Monthly Meetings Among Working Group Members 20 Organization Overview

Interaction/engagement with DOD officials DII Model Supplier Code (phase 2) Tool Kit for Small Companies Values-based Leadership Training Defense Industry Benchmarking Insider Threat Compliance Officer Core Competencies Program 21 Current Initiatives

General Questions and Answers