Inside Story on DoD’s Boeing Air Force Tanker Deal: Opinion Analysis

Washington, DC– The Department of Defense Feb. 24 announced its choice of Boeing for a $35 billion contract to build the Air Force’s next generation of mid-air refueling tankers. Boeing’s selection, subject to any challenge by the losing bidder EADS, could end a decade-long, scandal-ridden process that became one of the controversial and important in modern U.S. procurement history.

Boeing’s victory over the consortium lead by EADS (European Aeronautic Defense and Space Co.) surprised many industry experts who believed EADS held the edge over Boeing. Alabama’s powerful Republican Senate delegation fought so hard for EADS that Sen. Dick Shelby put a hold last February on every Obama nomination in the federal government unless the White House promised to give EADS what he called fair consideration. Later in the spring, President Obama promised to provide such fairness also in response to requests by European leaders, whose subsidies of EADS have sparked criticism at the World Trade Organization and elsewhere.

 
But DoD officials under Defense Secretary Robert Gates cited Boeing’s smaller planes among other factors in making this week’s award. “What that means is that, in the end, Boeing won on price,” Loren B. Thompson, a defense policy analyst for the Arlington-based Lexington Institute, told the Washington Post. “Price consists of the cost of producing the plane, plus the cost of operating it over 30 years,” he continued. “The Airbus plane is so much bigger and burned over a ton more fuel per flight hour.”

Boeing Bribery
My Justice Integrity Project has tracked the competition closely for a year and a half after learning from reliable sources details about industrial espionage and skulduggery. This went far beyond even the scandals showcased in Senate oversight hearings led by Sen. John McCain (R-AZ). Those scandals sent a Boeing executive and former Air Force procurement officer to prison on bribery charges and led in 2005 to DoD revocation of its initial award to Boeing.

Last spring, Connecticut Watchdog published my column, “I’m Shocked, Shocked! To Find Politics In Defense Contracting.” It linked EADS and its United States allies to the frame-up of former Alabama Gov. Don Siegelman on corruption charges. The plot, according to our sources, was for EADS-proponents working behind the scenes with selected federal authorities to remove the Democrat Siegelman from public life with trumped-up charges.

This was, according to our information, part of an overall plan to help well-connected military contractors and their political allies. In part, the EADS plan empowered Siegelman’s Republican successor, Gov. Bob Riley, to use his superb connections stemming from his previous House Armed Services Committee leadership to work with Europeans and fellow Republicans to win the contract. The contract is sometimes estimated, as here, at $35 billion. But is often reported also as $40 billion in United States spending. The value could be much more if other nations followed the U.S. lead to achieve economies of scale by selecting the same supplier. For this and other military deals, EADS created a North American subsidiary based in Virginia, partnered with politically well-connected Northrop Grumman — and planned $600 million parts reassembly plant in Mobile, AL.

Bidding With an American Face
All of this put an American face on the bid. This was vitally necessary for political reasons in an era of job-decline in the United States, especially given the political clout of Chicago-based Boeing and its workforce around the nation. As revealed by the McCain hearings, Boeing has its own dark-side in lobbying. Even publicly disclosed operations show that consultant David Plouffe, a longtime Obama adviser, has been on their payroll.

 
Investigative reporter Wayne Madsen, a Russia Today cable news commentator and former National Security Agency analyst, broke shocking allegations of government misconduct on his subscription-only website in a series of stories beginning in 2007.

Based on sources, he reported keen interest in the success of the EADS bid by Europe’s Rothschild family, the billionaire Russian aluminum tycoon Oleg Deripaska (whose company supplies materials that would be used if EADS won its bid), their U.S. allies, and others. Additionally, the Associated Press published a major investigative article during 2008 showing that the McCain Presidential campaign was bolstered by unusually high numbers of EADS-related lobbyists.

Madsen traveled to Libya in 2009 at the invitation of Moammar Qaddafi (sometimes spelled Gaddafi) to join hundreds of others others for a feast in the dictator’s tent on the occasion of the 40th anniversary of the dictator’s ascension to power. Madsen recalls that the dictator seated him and other American guests in the front row about a dozen feet from him, “for propaganda purposes.”

With that kind of highly unconventional and indeed controversial vantage point through the years, Madsen reminded his readers this week on Feb. 22 that, based on sources, Qaddafi’s son Saif al Islam Qaddafi has long frolicked at luxurious retreats with the Russian tycoon Deripaska and other proponents of the EADS bid. On his way to an RT interview Feb. 25, Madsen commented to us by phone, “It’s high-time for Qaddafi to fold his tent.”

EADS Wins, Then Loses
EADS appeared to be well-positioned after DoD in 2008 awarded the contract to the company’s North American affiliate and its co-prime partner, Northrop Grumman. But the Government Accounting Office disallowed that contract in 2009 and reopened the competition. Northrop Grumman dropped out, and EADS assembled a consortium of primarily U.S. subcontractors to win back the contract. Federal decision-making encountered several delays, including one last fall after DOD mistakenly sent each side their rival’s confidential bidding information.

During this process, our Justice Integrity Project has monitored major developments. Also, we have occasionally attended briefings by the major players for the press (primarily for those covering aviation and defense contracting) and monitored alternative information sources honed from our investigative reporting about the criminal justice system. For example, we covered a briefing last October at the National Press Club whereby the independent consultancy Iris Research presented its report “9 Secrets of the Tanker War.”

We don’t presume to provide regular coverage in such a specialized field as the technical requirements. So, we used such occasions to enhance our understanding of them, meet the specialists but not to publish ongoing stories. For whatever it’s worth, several of these specialist reporters told me that they didn’t know about efforts to indict Siegelman in Alabama. But why would they?

Siegelman himself, now free on bond pending resolution of his appeals from a seven-year sentence, told me last year he knew nothing about it either. When he was tried he and his attorneys knew nothing about the Air Force contracts of his trial judge either. The judge was Chief U.S. District Judge Mark E. Fuller of Alabama’s middle district. Fuller is portrayed at right in a rare photo, taken in a portrait session by Alabama photographer Phil Fleming at the judge’s invitation minutes after the Siegelman verdict in 2006.

 

Fuller was (and perhaps still is) the controlling shareholder of the closely held Doss, a defense contractor that received $178 million contract shortly before the Siegelman case to refuel Air Force planes, as we reported for the Huffington Post in an investigative report on May 15, 2009. True, that Doss work is in a somewhat different niche of Air Force contracting than the EADS-Boeing bidding war. But it’s close enough to underscore the forces at work in these kinds of high-stakes contracting battles, and the difficulty of mainstream media has in broaching non-official evidence and analysis even in the most controversial contracting dispute of the decade.

Similarly, virtually no in-depth mainstream commentary exists on the reasons why a 2001 Bush appointee, Middle District U.S. Attorney Leura Canary, left, is still running Alabama’s most important federal prosecution office. This is the one that prosecuted Siegelman, in part by using an Air Force base as a locale to prep the key witness against him.

 

For the record, Democratic Party officials say they have been unable to agree on the best successor for Canary, whose husband is a friend of Karl Rove, runs the Business Council of Alabama and served as campaign manager for Riley, Siegelman’s successor. But the story surely is more complicated than differences of opinion over Canary’s successor. The tradition in the United States is that partisan U.S. attorneys resign upon a change of Presidential administrations. This allows an interim prosecutor, usually chosen from the ranks of career professionals, to run the powerful regional offices until the Senate confirms a successor.

The full truth behind such matters ultimately requires a full congressional or Defense Department investigative run by professionals with unquestioned commitment to the truth and public interest. But with the stakes so high and the intrigue so deep involving so many, my opinion is there is scant realistic prospect that the traditional media or anyone else would find the will to build popular support for such an investigation.

The Justice Integrity Project homepage contains links to the articles mentioned in this column, as well as links to pro-Boeing and pro-EADS sites.

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Tags: Air Force, Boeing, EADS, Gates, McCain, Riley, Shelby, tanker