Bushco. Boeing Fraud

E-Mails Detail Air Force Push for Boeing Deal
Pentagon Official Called Proposed Lease of Tankers a 'Bailout,' Report Finds

By R. Jeffrey Smith
Washington Post Staff Writer
Tuesday, June 7, 2005; A01



For the past three years, the Air Force has described its $30 billion proposal to convert passenger planes into military refueling tankers and lease them from Boeing Co. as an efficient way to obtain aircraft the military urgently needs.

But a very different account of the deal is shown in an August 2002 internal e-mail exchange among four senior Pentagon officials.

"We all know that this is a bailout for Boeing," Ronald G. Garant, an official of the Pentagon comptroller's office, said in a message to two others in his office and then-Deputy Undersecretary of Defense Wayne A. Schroeder. "Why don't we just bite the bullet," he asked, and handle the acquisition like the procurement of a 1970s-era aircraft -- by squeezing the manufacturer to provide a better tanker at a decent cost?

"We didn't need those aircraft either, but we didn't screw the taxpayer in the process," Garant added, referring to widespread sentiment at the Pentagon that the proposed lease of Boeing 767s would cost too much for a plane with serious shortcomings.

Garant's candid advice, which top Air Force officials did not follow, is disclosed for the first time in a new 256-page report by the Pentagon's inspector general. It provides an extraordinary glimpse of how the Air Force worked hand-in-glove with one of its chief contractors -- the financially ailing Boeing -- to help it try to obtain the most costly government lease ever.

The inspector general's report, slated for release today at a Senate Armed Services Committee hearing, adds a new dimension to what Sens. John McCain (R-Ariz.), John W. Warner (R-Va.) and Carl M. Levin (D-Mich.) have already called one of the most significant military contracting abuses in several decades. Already, the scandal has resulted in prison terms for former Air Force principal deputy assistant secretary Darlene A. Druyun, and a senior Boeing official, Michael M. Sears.

Besides documenting precisely who was responsible, the new report details the Air Force's vigorous efforts on Boeing's behalf. It also shows how Air Force leaders and Boeing officials jointly manipulated legislation to authorize the deal and later sought to suppress dissenting opinion throughout the Pentagon.

After interviewing 88 people and reading hundreds of thousands of pages of e-mails, the inspector general's office concluded that four top Air Force officials and one of Defense Secretary Donald H. Rumsfeld's former top aides, Undersecretary of Defense Edward C. "Pete" Aldridge, violated Pentagon and government-wide procurement rules, failed to use "best business practices," ignored a legal requirement for weapons testing and failed to ensure that the tankers would meet the military's requirements.

The report also connects Rumsfeld to policymaking on the lease, recounting a statement by former Air Force secretary James G. Roche that Rumsfeld had called him in Newport, R.I., in July 2003 to say "he did not want me to budge on the tanker lease proposal," despite criticism.

Earlier, after Roche made what he acknowledged was a "special pleading" for the lease at a key meeting with Rumsfeld on Jan. 31, 2003, Pentagon spokesman Lawrence T. Di Rita jokingly said "that my comments 'were brought to you by the Boeing Company,' " Roche later told Air Force Chief of Staff John P. Jumper in an e-mail. "I didn't rip his heart out," Roche added.

Air Force spokesman Douglas Karas said he could not comment on the report in detail until it has been officially released. He said, however, that "we've learned from this experience" and will apply the lessons to future procurement of large weapons systems. Di Rita and Rumsfeld were in Thailand yesterday. A Boeing spokesman said the company could not comment on a report it has not read.

The Pentagon and Congress ultimately killed the lease deal. Pentagon officials have noted that the department is now conducting special oversight of Air Force weapons-buying, in part because of the problems with the Boeing deal.

In the copy of the report obtained by The Washington Post, 45 sections were deleted by the White House counsel's office to obscure what several sources described as references to White House involvement in the lease negotiations and its interaction with Boeing. The Pentagon separately blacked out 64 names and many e-mails. It also omitted the names of members of Congress, including some who pressured the Pentagon to back the deal.

The report is nonetheless the most damning of the three reviews of the tanker deal completed by the inspector general since early 2004. It includes, for example, a statement from an unnamed cost analyst that "numbers were contorted a lot of different ways to sell the program."

It also suggests that the foundation of the Air Force's tanker lease -- that KC-135 planes were experiencing unexpected corrosion and needed urgent replacement -- was a house of cards. The report said the Air Force could not substantiate congressional testimony by two of the officials -- Roche and Maj. Gen. Paul W. Essex, a former head of its global reach program office -- on that subject.

"In fact, the studies that were available did not indicate an urgent or immediate requirement for the replacement of . . . KC-135 tankers," the report said. That view was confirmed last year by the Defense Science Board, which said the KC-135 airframes were usable until 2040.

The report says that Marvin R. Sambur, then the top Air Force acquisition official, knew that this urgency "did not exist" but claimed otherwise and ordered data unflattering to the deal removed from a key document. His office made what a critic of the lease elsewhere in the Pentagon interpreted as a "thinly veiled threat" to manipulate other Air Force contracts if the dissent did not cease, the report shows.

Sambur and Roche, who have resigned from the Air Force, did not respond to phone messages requesting comment. Previously, they have said their actions were appropriate and endorsed by others, including White House officials.

Druyun improperly used her influence to increase the price paid for the tankers and also made incorrect statements to others in the administration, the report states. When Air Force cost analysts told her that leasing would cost $2 billion more than buying the planes, she told the head of the Air Force Materiel Command that "she no longer needed the financial management team . . . on the project."

The Air Force has long maintained that any defects in the lease proposal were attributable solely to Druyun, who is serving a nine-month sentence in federal prison for illegally negotiating a lucrative job with Boeing as she supervised the lease negotiations. An employee at Akin Gump Strauss Hauer & Feld said the law firm no longer represents Druyun.

The inspector general's report makes it clear that the Air Force's aggressive pursuit of the lease over a three-year period was actually a team effort, and that shortly after Druyun agreed to the concept in a September 2001 meeting attended by Essex and top Boeing officials, other top officials fell into lock step with her. Roche backed the idea in a letter to Capitol Hill dated Oct. 9, 2001, without conducting a legally required analysis of alternatives, and blocked such an analysis in August 2003, according to the report.

Boeing's interests were at the center of the deal, the report suggests. Less than a month after Druyun's meeting with Boeing, the Air Force began developing requirements for the new tanker "tailored to Boeing . . . tanker aircraft capabilities," the report states. The result fell short of what other services, such as the Navy, wanted, and it excluded the passenger, cargo and medical evacuation roles for the plane that some military officials desired.

Boeing prepared briefing materials that Druyun presented to lawmakers while seeking congressional approval of the deal and worked with Druyun to refine the wording of legislation that specifically named the company as the beneficiary of the deal. Roche and Sambur later cited that language as the prime reason for favoring Boeing.

Druyun "was accountable for manipulating the congressional language," the report states.

Her tactics sowed previously undisclosed resentment among Air Force cost analysts and others, according to the report. At a June 2002 negotiating session in California with Boeing officials present -- a meeting that later came to be known inside the Air Force as "The Long Beach Massacre" -- Druyun "pretty much by herself pushed the Air Force team to the high end" of the price range, one of those present told investigators.

Cooperation between Boeing and the Air Force was nonetheless not always perfect, according to the e-mails recounted in the report. Roche complained in November 2002 to Sears, Boeing's top financial officer, and Phil Condit, Boeing's board chairman, that they were not lobbying hard enough on Capitol Hill.

Roche wrote, "Gee Mike, when I knew you and Phil, I had the sense you wanted to make money. Guess I was wrong." Boeing executives later pressed subcontractors to call the White House, and met with Andrew H. Card Jr., the White House chief of staff, who backed the deal.