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This is another historical document/article. It is interesting when one starts researching, the number of things that pop up and the patterns that appear to emerge. There are a lot of investigations going on currently. I am trying to build up a record of things that have happened over time, so everyone can read and think, and start to recognize patterns and connections. G.F. Scott
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CounterPunch (Out of Bounds Magazine)
Original article at: http://www.counterpunch.org/stclair07262003.html
July 26, 2003
Onward and Downward
Book Cooking at Boeing
By JEFFREY ST. CLAIR

Early this summer, a top Wall Street stock picker issued a glowing report about Boeing: buy, buy, buy. The unusually rosy assessment for the troubled company had nothing to do with the need to replenish the Pentagon's arsenal of cruise missiles depleted by the Iraq war or the Bush administration's drive to implement Star War, both of which will net Boeing billions. No, this analysis, written by Heidi Wood, a vice-president at Morgan Stanley, pointed to "a no risk" risk deal with the federal government to lease 100 Boeing-767 tanker aircraft.
According to Wood's report, the deal will generate $2.3 billion in profit for Boeing. To put this in perspective, that's about as much profit as Boeing reaps for the sale of 1,033 of its 737 commercial airliners. From Boeing's perspective, the great part of the tanker deal is that the company has few obligations, yet the government is locked into the leases, even if it proves that the Pentagon doesn't need the planes. Boeing is guaranteed a 15 percent profit on each plane it delivers. "There's substantially less risk than is common in the commercial aircraft market," Wood wrote.

Wood should know what she's talking about. The Wall Street Journal calls her the top stock analyst in the Aerospace / Defense sector and she also serves as a Bush appointee to the Commission on the Future of the US Aerospace Industry.

Under the deal approved by the Pentagon last month, Boeing will convert 100 B-767s into military refueling tankers. It's quite a coup, because many Air Force generals have said that the planes aren't needed, an assessment backed up by a Government Accounting Office investigation.

There are currently 545 KC-135 tankers in the Air Force fleet. More than 400 of them are new, fully upgraded "R" models. The other 134 tankers are older "E" models that some inside the Pentagon and the Congress are anxious to replace with the leased planes from Boeing.
On the surface, the Boeing proponents appear to have an argument: the E tankers are aging. Most of the planes are 35 years old. However, the Air Force primarily assesses the life span of planes based not on age but on flight hours. The engines for the "E" model has a projected life of 36,000 flying hours. A 1995 GAO report revealed that the majority of the "E" tankers have accumulated about 13,000 hours. The report projected that not one of the tanker planes in the fleet would reach its limit until 2040. The new plan is to begin replacing the E tankers with the Boeing planes in 2006.

Even if the Air Force decided it needed to upgrade the engines on the E planes sooner, because of added usage and stress from the wars in Afghanistan and Iraq, it would be much cheaper to simply upgrade the engines instead of entering into a lease arrangement with Boeing. The GAO estimates that the entire fleet of "E" tankers could be upgraded with "R" engines for about $3.6 billion. This is more than seven times cheaper than the $26 billion the Air Force will have to fork out for the Boeing commercial tankers.

Despite the fact that Boeing famously fled Seattle to set up its new headquarters in Chicago, the tanker lease deal was engineered through the tireless work of the Washington State congressional delegation, led by Sen. Patty Murray and Congressman Norm Dicks. Wood, who demonstrates a sophisticated understanding of the political economics of the Beltway, cautions investors that Boeing may need to demonstrate its gratitude to the Washington delegation by agreeing to locate some of its manufacturing plant for the new 7E7 commercial jet in Seattle rather than in a more corporate friendly environs.

"A subtle negative may be the payback required considering political capital BA [Boeing] has expended to land the tanker deal," Wood warned. "Now the company is somewhat beholden to its hard-working Washington constituency. This may limit some of the latitude the company would probably like to have in deciding where to build the 7E7, adding pressure to keep some of the 7E7 work in expensive, union-dominated Seattle."

Of course, the congressional delegation couldn't have prevailed on its own. Boeing got some vital help greasing this deal from the inside as well in the form of Darleen Druyun, a top Air Force official who called herself the Godmother of the C-17-the troubled air transport plane made by Boeing. According to Pentagon sources, she helped craft the tanker deal, fought off skeptical Pentagon accountants and auditors, worked the appropriations committees and, finally, when it all seemed nicely tied up, retired from the Pentagon and joined Boeing as an executive vice-president, where she now supervises the company's interests before congress and the Pentagon.
Druyun is not the only Pentagon powerbroker to be recruited into Boeing's corporate hangar. Recently, Boeing's board has boasted both former Defense Secretary William Perry and John M. Shalikashvili, at one time the chairman of the Joint Chiefs of Staff. In 2001, Boeing also hired Rudy de Leon, Clinton's Deputy Secretary of Defense, to run its Washington office. Although De Leon is known as a hawk and a masterful dealmaker, his hiring may have been a rare misstep for Boeing, since congressional Republicans howled that the company should have picked one of their own from the Pentagon's rolls.

It's just this kind of zealous devotion to political payback and behind-the-scenes influence peddling that has landed Boeing in a rare spot of trouble. According to a one paragraph item in Reuters from early June, the Inspector General of the Air Force has opened an investigation into Boeing whether or not Boeing should be debarred from bidding on contracts with the federal government. The probe stems from allegations that Boeing executives received proprietary information from Lockheed concerning bids on Pentagon contracts.
The Lockheed affair is not Boeing's only transgression. The Project on Government Oversight, a DC-based Pentagon watchdog group, reported last year that since 1990 Boeing has committed more than 36 violations and has been forced to pay more than $350 million in fines, penalties, restitution and settlement. Among the more recent allegations:

Boeing placed defective gears in Chinook helicopters;
Company officials offered bribes to officials of the Bahamas government as a means of securing a contract;
Produced a defective safety system for the Apache helicopter;
Misrepresented the progress of clean-up at Rocky Flats nuclear weapons site; Charges from the State Department that Boeing violated the Arms Export Control Act and International Traffic in Arms Regulations-more than 100 instances are cited;
Accused of civil rights violations in hiring and salary practices toward blacks and women;
Routinely mistated labor costs and exaggerated overhead costs.
These are serious charges of criminal and civil malfeasance, some of which Boeing didn't even dispute. Yet, despite the rap sheet, Boeing has never been suspended or debarred from bidding on contracts since 1990. Federal contract guidelines require that contractors to the government sanction violators and only award contracts to "responsible" contractors with a record of "integrity and business ethics".

Of course, Boeing is hardly alone in getting a pass from these high-minded rules. In the past decade, out of the top 50 defense contractors the Pentagon has only suspended the contract privileges of only one major company, General Electric Avionics Division, and that lasted for only five days.

Even so, some in Congress aghast at the mere possibility of a crackdown on cheating contractors make haste to loosen the rules even further. At the behest of Boeing and other big contractors, Rep, Tom Davis, the Virginia Republican who chairs the House Government Reform Committee, has just introduced legislation that will unravel many of the key provisions governing the regulation of Pentagon contracts.
One of the changes proposed by Davis is for the Pentagon to shift to so-called Time and Material and Labor Hour contracts, where the weapons firms would get paid for how much time they spent working on a project rather than by such standards as to whether they completed it on time or according to code. This amounts to a blank check without any incentive ever finish the job. Davis even includes a provision that would prohibit government auditors from examining the contractor's billing records.

The congressman, who once won a Harvard rock trivia contest by correctly identifying the Blues Magoos as the group that performed the 1966 hit "(We Ain't Got) Nothin' Yet, also wants to expand the use of Share-in-Savings Contracts, a kind of Enron-style financial speculation that allows contractors to be lavishly reimbursed for investments in infrastructure upgrades, such as computer systems. The companies are allowed to charge the government for "efficiency savings" over the lifetime of the contract. But even the Bush administration is skeptical of such claims. In hearings before Congressman Davis's committee last year, Angela Styles, the chief procurement analyst for the White House, testified that her office had examined dozens of the contracts and "we have seen no real savings."

The program is so ripe for fraud that one expert in defense contracts compared it to the savings-and-loan scandal. "Share-in-Savings contracts could propagate problems similar to those that accompanied deregulation of the government-insured savings-and-loans institutions or procurement of defense spare parts in the 1980s by sole-source contracts," says Charles Tiefer, a professor at the University of Baltimore School of Law.

The biggest prize for the defense contractors is Davis's plan to scrap key provisions in two hated laws: the Truth in Negotiations Act and the Cost Accounting Standards Act. Back in the late 1960s, Senator William Proxmire teamed with Admiral Hyman Rickover to standardize accounting procedures for defense contractors during the spending frenzy of the Vietnam War. They also set up a board to oversee the enforcement of the standards and deflate the complex accounting tricks of the defense contractors which were costing the government more than $6 billion a year.

The Truth in Negotiations Act forced weapons manufacturers to come clean with the true basis of their pricing and cost data. Under current guidelines, defense contractors must comply with TINA for any contract over $550,000. Davis's measure would effectively gut the bill by making the reporting requirements apply only to contracts involving more than $200 million.

After the defense industry consolidation frenzy of the 1990s, many Pentagon contract offerings now receive only one bid. To allow the defense companies to set their own accounting and pricing rules in this sole-source environment is to invite the kind of runaway fraud last seen in the procurement scandals of the 1970s and 1980s. It's one way to jumpstart the economy. No wonder Wall Street's bullish on Boeing.

[Postscript: This article was written in June. On July 25, the Pentagon announced that it was prepared to impose sanctions on some of Boeing's subsidiaries for contract fraud. This is the first tiime in more than a decade that the Pentagon has taken action against one of its prime contractors. The terms of the sanction have not yet been announced. But don't expect the sentence to be too harsh. The last time the Pentagon barred a big contractor from bidding on new contracts the ban only lasted five days. --JSC]

Jeffrey St. Clair is author of Been Brown So Long It Looked Like Green to Me: the Politics of Nature (Common Courage Press) and coeditor, with Alexander Cockburn, of The Politics of Anti-Semitism (AK Press). Both books will be published in October.

Robert Weissman| BIO
The Boeing Scandal After the Boeing Scandals
Posted July 11, 2006 | 07:47 AM (EST)

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Read More: Breaking Politics News



The United States treats its petty criminals harshly, and not just the worst offenders.

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If you get caught selling small amounts of marijuana, or get caught stealing on a couple occasions, you are liable to get a significant jail term. Once you get out, you may well find you have to pay thousands of dollars in court costs and other fees. Get placed on probation, and you may have to pay the costs of your probation officer.

You may be deprived of your right to vote. You will find it very hard to get a job.

On the other hand, the crimes of corporations get treated with kid gloves. Leave aside for a moment the treatment of individual executives -- that's a topic for another day -- to consider how light the treatment is for corporations that commit crimes.

The latest evidence is a remarkable deal the government just entered with Boeing.

In May, the Justice Department announced a tentative agreement with Boeing to resolve two entirely separate and quite serious cases of apparent criminal wrongdoing.

The deal looked scandalous in May. But then the final agreement was announced just before the July 4 weekend, and it turns out to be worse than anyone could have anticipated.

Both of the instances of Boeing's wrongdoing involved major offenses against the U.S. government and U.S. taxpayers. They both involved projects of considerable importance to Boeing. And in both cases the company's conduct was extraordinarily egregious; these were not failures to comply with arcane rules, but theft of a competitor's proprietary data to facilitate bid-rigging and a quid pro quo arrangement with a government contracting officer to facilitate a massive government overpayment for a weapons system of very questionable benefit.

In the Evolved Expendable Launch Vehicle Program scandal, Boeing acquired 25,000 pages of bidding documents from its sole competitor, Lockheed Martin. It then used the information to set its bids just below those of Lockheed. The government and taxpayers were thus cheated of the benefits of genuine competition.

In the elaborate Darleen Druyan affair, Air Force contracting officer Druyan admitted doing a variety of "favors" for Boeing. In the Pentagon's misguided deal to lease rather than buy tankers from Boeing, Druyan admitted that she "agreed to a higher price for the aircraft than she believed was appropriate." Boeing reciprocated for these gifts -- ripoffs of taxpayer money -- by hiring her. Her hiring was managed at the highest levels of the company, involving then-Chief Financial Officer Michael Sears.

Despite the gravity of the corporate wrongdoing in the two cases, Boeing is going to get off with payment to resolve civil claims and a $50 million "monetary penalty." Not a criminal penalty, mind you, because Boeing is not being charged with any crimes, nor acknowledging that it might have been, based on the evidence. The company gets to avoid the reputational harm of a criminal plea -- or even a criminal charge -- and Lockheed won't be able to use any Boeing concession of criminal wrongdoing in the companies' ongoing civil litigation (which, incidentally, might be resolved by the two firms' rocket launch divisions merging).

For extensive materials on these cases, check out the good work of the Project on Government Oversight.

Non-prosecution deals like the Boeing agreement are the norm, not an exception. My frequent co-author Russell Mokhiber of Corporate Crime Reporter issued a study this past December which found that there were at least 34 non-prosecution and deferred prosecution agreements with large corporations between 1992 and 2005 -- with more than two thirds of the cases occurring since 2002.

But there are a few novel features of the Boeing deal.

First, it settles two entirely separate cases at once. One factor the Department of Justice is supposed to use in deciding whether to prosecute criminally is whether a company is a repeat offender. Here, we know Boeing is -- because the no-prosecute deal itself resolves repeat offenses.

Ralph Nader and I have written to Attorney General Alberto Gonzales, asking him to undo the Boeing deal and formally reassess the routinized use of deferred prosecution and non-prosecution agreements for large corporations. Our letter is here.

The basic idea behind non-prosecution or deferred prosecution deals is that prosecutors can extract commitments for corporate reforms that are more far-reaching than what they would have achieved with a criminal prosecution. A key element in all of these deals is that the company benefiting from the deal promises not to repeat the behavior that got them in trouble in the first place.

The second novel feature of the Boeing deal is how Boeing's lawyers restricted this pledge. As Russell Mokhiber first noted, under the terms of the actual agreement -- which the Justice Department only made available after Russell harrassed them -- if a non-executive level Boeing employee violates the agreement, that doesn't count as a violation by Boeing. "Drawing the line between executives and other employees is a little crude," said Columbia University Law Professor John Coffee. "I don't think you want to tell non-executive employees they are legally immune and can't get the company in trouble. You want the company monitoring all employees." That's not all. Under the terms of the actual agreement, if an executive commits a violation but the company turns them in, that doesn't count as a violation either. Russell and I wrote about these remarkable provisions -- which means to a considerable extent that Boeing can't violate the agreement with the Justice Department even if it does violate the agreement -- here.

While Congress is going through the Kabuki dance of considering flag-burning amendments, the real business of Washington goes on.

Forbes reports in “Boeing to Pay $1M to Settle Bills Claims” July 16, 2007, that the Boeing Company has agreed to pay more than $1 million to settle allegations that the company over billed for materials used in installing new KC-135 aircraft engines. U.S. attorney’s announced this Monday, July 16. Forbes story available at: http://www.forbes.com/feeds/ap/2007/07/16/ap3919116.html

U.S. attorney, Eric Melgren, is quoted as saying “that the government alleged that Boeing double-billed for materials used in modernizing KC-135 Stratotankers and RC-135 reconnaissance aircraft. Materials double billed included nuts, bolts, rivets, and fasteners.” Further more, prosecutors alleged, “that Boeing charged for the materials even though those costs were included in the company’s contract with the government.”

It appears that, if the allegations of double billing are true, by allowing Boeing to settle out of court, the U.S. Attorney General’s office has rescued the company once again from the logical consequences of their actions. Criminal charges, which if they’d been found guilty in court, would have caused an official record of criminal wrong-doing and the probability, if not requirement, of punitive removal of the company’s eligibility to bid on and be awarded lucrative government defense contracts for a set period of time, or possibly indefinitely.
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V.M. notes:

This is the kind of thing, that an alert employee or other person might notice and choose to report the wrongdoing. This is an example of how ethical employees find themselves labeled as whistleblowers, and find their life disintegrating. Anonymous reports of fraud, waste and abuse may be reported ANONYMOUSLY to the Project On Government Oversight (www.pogo.org) and possibly other organizations as well.

Responsibility
Monday, July 23, 2007, 04:16 AM
Please see my post on 7-18-07 if you might be interested in contributing to my Legal Defense Fund. Thanks. Gerald Eastman, The Last Inspector (www.thelastinspector.com)

Responsibility. An interesting concept. Of course, I am responsible for my own actions just as other people are responsible for theirs. Boeing and the county are attempting to make me responsible for actions I didn't even do, and to punish me in the worst possible way for those "crimes." While I didn't commit the crimes they wrote in a novella that they thought I committed, I do admit to mistakes in my long history of trying to bring FAA and Boeing fraud to an end. It was those errors that placed me in a vulnerable position for their unfounded charges. But hindsight is 20/20. You can't expect a corrupt corporation (the most arrogant one on the planet per the Boeing corporate security manager listed in my charging papers) to do anything different than what they did in my case, and to not influence the SPD and King County Prosecutor's office in similar ways that they control the FAA and certain other government agencies.

I am responsible for what I did. That is for sure. What I did, however, is quite the opposite of what I am accused of. That will be proven in court.

However, the real criminals are still on the loose, apparently with the full blessing of the King County Prosecutor to continue their crimes. One of my fellow inspectors called the process, "pushing garbage out the door."

You have to wonder how these criminals live with themselves. If it wasn't for their criminal inaction and protection of the rollerstamping quality system at Boeing at all costs, I wouldn't be in the situation I am now. That's not saying I don't take responsibility for my actions--it is saying that they don't take responsibility for their own criminal activities.

If any of the people I contacted had acted to end the obvious fraud going on at Boeing, I would have been happy and still working there if I wasn't therafter harassed and retaliated against for being the one responsible for ending the fraud at Boeing.

However they refused to do their jobs--Boeing QA management was doing the opposite of their duties to ensure the integrity of the Boeing quality system. I couldn't get them to reverse course on their bent.

The FAA refused to do their jobs so many times I lost count. It would have only took one person of integrity that was involved in the "investigation" of my report to do the right thing and therefore end the fraud at Boeing. From local FAA MIDO and TAD personnel, to FAA Headquarters in Washington D.C., none of the many people involved chose to do the right thing. My report documented the result of years of Boeing and FAA fraud. The FAA could have "turned a new leaf" and severed their corrupt relationship with Boeing after the saw how decrepit Boeing's quality system had become under their "hands and eyes off" "oversight" of Boeing's production system. But they didn't. They didn't pick up the phone to the FBI to bring my QA management to justice because they likely feared that they would also be held accountable for their corruption by the FBI. So they did next to nothing, and made my report go away with the minimum action possible against their partners in crime.

Surely I ruffled some feathers at the FAA in trying so hard to get them to end this fraud that obviously threatened many lives. These corrupt people are likely happy I am where I am today, even if it was their own refusal to do their jobs that led me to where I am today.

Boeing headquarters in Chicago is also responsible in part for where I am today. Twice they refused to take serious measures to end the fraud I reported to them. It would be a very costly fix to end this fraud--a cost they weren't willing to bear.

The Boeing Ethics Department is also partly responsible for continuing this fraud and making me go elsewhere to get it ended. They refused to touch corrupt QA management no matter how many witnesses there were. They worked together with Boeing Legal to ensure no manager was implicated in the corruption noted in my report. I don't think it is an accident the QA manager I complained about the corruption of was saved from layoff and promoted after my cpmplaint.

So, I think its kind of interesting what all of these people think about me paying for their crimes of intentionally not doing their regulation required duties. Do you think any of these people have a conscience and wish they had done their jobs instead of looking the other way? Or do you think they derive pleasure from getting me, the "do gooder" in the position I am now in? I agree that it is likely the latter feelings they are having, if any. After all, most of their dirty laundry is on my website to see. Maybe they think my website will go away if I do, and they will be free to practice their fraud behind closed doors as before.

A chief reason I think these people who refuse to do their jobs to this day to end this fraud feel no responsibility for the situation I ended up in directly as a result of their fraud is not simply because I tried to expose their fraud to their similarly corrupt superiors. It is instead in their very nature that they have had to cultivate over the years in order to take part in this fraud without seemingly blinking an eye--they have no empathy for anyone--especially the public they are supposed to protect. They have grown these careless hearts similar in character to the ones that let a serial killers kill without any feeling for their victims. They don't seem to care that their own "oversight" of their responsibilities in their critical aviation roles could easily make them the killers of many as well, in just one fell swoop. They simply are unable to take responsibility for their actions. If they did have consciences, they could not be part of their corrupt organization's pretend oversight of quality and safety processes critical to public safety.

My problem that got me in this situation is that I cared about the lives they were placing in danger by their fraud, and I had a conscience--something they could never understand--a conscience that led me to take action to protect the public when they would not. In their twisted logic, it is me that was "defective"--not them.

So, the county is trying to make an example of the "do gooder" in me that tried to end this fraud, while protecting the real criminals in this affair. How ironic. Maybe I shouldn't take responsibility for my "mistakes" in trying to bring them to justice until they take responsibility for their own crimes in all of this. If I did that, however, I would probably be waiting forever for them to come clean.

And so it goes. Those responsibile for much greater crimes than I am accused of go free, while I am held responsible for the trumped up crime of trying to make Boeing and the FAA responsible for their own crimes when they are unwilling or unable to take responsiblity for them themselves.