Tuesday, November 23, 2004

Boeing's Unwanted Enemy

An earlier post (Nov. 17) discussed the government's investigation of Boeing and the guilty pleas of two former executives, one of whom had been a senior Air Force official, for negotiating employment while the official worked on a contract awarded to Boeing.  The Air Force's favorable treatment of Boeing has created a very significant enemy for the company: Senator John McCain (R-Arizona).  On Friday, November 19, Senator McCain released a statement in the Congressional Record detailing the Air Force's favoritism toward Boeing and its attacks on the company's main rival, Airbus.  Two days before the Senator released his statement, Secretary of the Air Force James Roche and Assistant Secretary of the Air Force for Acquisitions Marvin Sambur announced their resignations.  Both were prominent proponents of Boeing.

Along the way, Boeing also appears to have orchestrated a campaign against Senator McCain, who strongly opposed the award of a multi-billion dollar contract for Boeing to lease plane to the Air Force.  Senator McCain's statement includes the following:

Throughout 2002 and the beginning of 2003, even agencies within the Defense Department and the Air Force, including Program, Analysis and Evaluation; the Office of Management and Budget; and even the Air Force’s own General Counsel’s Office, raised salient concerns about aspects of the proposal. These concerns, however, would not get in the way of Air Force leadership. Rather than resolve these concerns, Air Force proponents continued to aggressively push the deal in the press. A Wall Street Journal editorial, entitled “John McCain’s Flying Circus,” published on the very same day as my tanker hearing in the Commerce Committee, is particularly notable. It was obviously drafted with considerable help from the Office of Air Force Secretary. In it, tanker proponents accused me of “trying to prevent approval by running up my own Jolly Roger” and brazenly exaggerated the Air Force’s need for tankers by describing how, during Secretary Roche’s visit to Tinker Air Force Base, he “peeled back the skin of a tanker being refurbished and found the metal underneath disintegrating before his very eyes.”

By this time, Air Force leadership’s aggressive press campaign was well underway. On April 25, 2002, Secretary Roche’s special assistant William Bodie told Secretary Roche that he “saw Rudy deLeon [who heads Boeing’s Washington Office] at the Kennedy Ctr and politely asked the Great White Arab Tribe of the North [which is what these folks called Boeing] to unleash their falcons on our behalf for once. And, I talked to [defense analyst] Loren [Thompson], who is standing by to comment to this reporter about the national security imperatives of tanker modernization. [Editor of Defense News and Air Force Times] Vago [Muradian] is also standing by. I will get with [Assistant Air Force Secretary for Acquisitions Marvin] sambur first thing to rehearse talking points. We will get with you before we talk to the reporter.”

The Senator also released e-mails from Secretary Roche showing how he favored Boeing over Airbus:

Secretary Roche’s e-mails, however, suggests that he is indeed a man who allows his personal animus to stifle competition. For example, on September 5, 2002, Darleen Druyun wrote to Secretary Roche, “I read with disgust the article on Airbus tankers from the new EADS CEO of North America. What BS ... should not have been surprised at the slime ... his day of reckoning will come hopefully.”

Secretary Roche answered, “Oy. I agree. I had hoped you would have stayed and tortured him slowly over the next few years until EADS got rid of him!” This, from a person who testified that he “believes” in competition. Secretary Roche’s personal contempt for one defense contractor and, in particular, its CEO, is clearly reflected in his other e-mails. For example, on August 7, 2002, when Secretary Roche learned that Ralph Crosby, with whom Secretary Roche once worked at Northrop Grumman, was appointed to head EADS’ North American operations, Secretary Roche wrote to his special assistant William Bodie, “Well, well. We will have fun with Airbus.”

The day after, William Swanson at Raytheon asked Secretary Roche, “Did you see the notice on Ralph and EADS?” Secretary Roche responded: “Right. Privately between us: Go Boeing! The fools in Paris and Berlin never did their homework. And, Ralphie is the CEO and Chairman of a marketing firm, for that’s all there is to EADS, North America. The [Air Force] has problems with EADS on a number of levels. The widespread feelings about Crosby in the Air Staff, Jumper especially, will only make their life more difficult. Smiles.”

Senator McCain is not the type of enemy a company that does extensive business with the Pentagon wants to make. (ph)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2004/11/boeings_unwante.html

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