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US: Boeings Ties Bloat Government Budgets

by Frida BerriganIn These Times
September 19th, 2003

Boeing is not only one of the largest weapons manufacturers in the world, it is also a master of the fine art of quid pro quo. When the going gets tough, this Chicago-based giant gets tougher by calling in its favors and relying on friends in Washington. Just the latest instance of this can be seen in a unique leasing deal Boeing negotiated with the Air Force and almost squeezed through Congress.

Under the terms of the agreementwhich has gotten long-overdue public scrutiny thanks to Senator John McCain (R-Arizona) and his Commerce Committee the Air Force would lease 100 Boeing 767 air-refueling aircraft for more than $20 billion. As In These Times was going to press, the Pentagon was deciding whether or not to approve a smaller lease of planes instead.

Rudy DeLeon, senior vice president for Boeing, insists that the original deal would be good for the Air Force and good for Boeing. DeLeon is in a position to know he came to Boeing from the Pentagon, where he served as Deputy Secretary of Defense from March 2000 until March 2001. But does he know what is good for taxpayers who would foot the bill?

The numbers say no. The Congressional Budget Office estimates that the original lease plan would cost $21.5 billion, while purchasing the aircraft outright would cost $15.9 billion. That means Boeing could pocket almost $6 billion in cool profit. Air Force Secretary James Roche disputes those figures, saying the plan would only cost an extra $150 million.

Regardless of which figure ends up being right, there is no question that the deal would be a huge bonus for Boeing, because it seems clear that the Air Force has no pressing need for the refueling tankers. Just two years ago the Air Force said their tanker fleet would be serviceable through 2040. With wars in Afghanistan and Iraq, the planes are getting more work than anticipated two years ago, but that does not explain the huge leap from 2040 to ASAP.

McCain calls the deal an instance of living for today and plundering resources for tomorrow and has made it his business to squash it. At the beginning of September, he held hearings on the lease plan and released thousands of documents that show a disconcerting level of collaboration between Boeing executives and top Air Force officials. The 8,000 pages reveal negotiators on both sides problem-solving, brainstorming, and lining up formidable political support for the deal.

In all my years in Congress, McCain complains, I have never seen the security and fiduciary responsibilities of the federal government quite so nakedly subordinated to the interests of one defense manufacturer.

While the documents provide a disturbing insight into how billion-dollar deals are built, they also bring to light a revolving door scandal. Darleen Druyun, the Principal Deputy Assistant Secretary for Acquisitions and Management, was a key negotiator for the Air Force. McCains documents show her sharing potentially proprietary information about a rival companys bid for the tanker contract with Boeing.

The Pentagons Inspector General has launched a formal investigation to determine if Druyun broke the law to help Boeing. No matter what it concludes, Boeing clearly appreciated Druyuns insights and hard work. After retiring from the Air Force, she joined Boeing as Deputy General Manager for Missile Defense Systems in January 2003.

Boeing also has friends in Congress whose hard work they appreciate. As the White House and Pentagon prepared to launch a war against Afghanistan in fall 2001, Representative Norman Dicks (D-Washington) wrote to President Bush explaining how the terrorist attacks had affected Boeing.

As a solution, Dicks described the unique opportunity Congress had to help Boeing and the Air Force at the same time, and asked Bush to add $2.5 billion for Boeing to his economic stimulus package. What Dicks did not mention was that as the representative of Boeings district in Washington state he has received almost $54,000 from the company in the last four election cycles and has a vested interest in the company thriving again.

Ted Stevens, Senior Republican on the Appropriations Committee, also worked hard for the deal. Why did the Alaskan senator care? It is not too hard to draw some conclusions. Defense Week reports that just a month before shepherding the legislation through Congress, Stevens held a fundraiser where Boeing executives handed over $22,000 in checks. The company was Stevens top contributor, adding $34,400 to his 2001 reelection campaign. All but one of the executives who cut $1,000 checks were giving to the Senator for the first time, underlining his importance to the company. The timing and size of the donations makes it hard to accept claims from his office that there is no connection between campaign contributions made to Senator Stevens and his legislative activities. As Eric Miller, Senior Defense Investigator with Project on Government Oversight, notes, you would have to be paid off to vote for such a bad idea.

And this is just the tip of the iceberg. Boeing, like other major weapons manufacturers, has stacked its deck with Washington insiders. John Shalikashvili, retired Chairman of the Joint Chiefs of Staff is on the Boeing board. Former Ambassador Thomas Pickering is Boeings Senior Vice President for International Relations.

How can Boeing, the Air Force, and Members of Congress claim that this multibillion-dollar boondoggle is good for anyone but themselves? McCain is on the money when he calls Boeings bailout a military industrial rip-off.

Frida Berrigan is a senior research associate with the Arms Trade Resource Center, a project of the World Policy Institute.





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