The Bribes and Boondoggles
Sightings from The Catbird Seat
~ o ~
"The Defendant has in conscious, willful, and malicious violation of its common law
duties to the Plaintiff engaged in conduct which caused, and continues to cause,
the Plaintiff harm, loss, hardship, and anguish. That conduct included, but is not
limited to: maliciously and willfully conspiring with others against the life of the
Extract from the 'Complaint' against the Boeing Company.
Anthony P. Keyter vs. the Boeing
Plaintiff Anthony P. Keyter was an employee of The Boeing Company for nearly 17 years
from July 1989 to March 2006. Plaintiff held the position of Senior Instructor Pilot and Manager
with the company, and enjoyed the esteem of The Boeing Company in that professional
position. As such plaintiff represented the company on worldwide assignments. As Senior
Instructor Pilot for the Boeing Company, plaintiff was qualified to fly all Boeing aircraft in recent
production, including B737, B747, B757, B767, and B777 aircraft. Plaintiff is also a Member
of the Society for Experimental Test Pilots and holds a Masters Degree in space science from
the University of Houston, and a Bachelors Degree in quantum physics and astronomy from
the University of South Africa.
Plaintiff brought this civil action for damages against the Boeing Company for harm and loss
caused by reckless disregard of its common law and statutory duties towards plaintiff arising
from a criminal conspiracy by company executives and directors, and senior US Government
Officials, to kidnap and murder plaintiff - one group performing one part of the criminal act,
the other group performing another part of the act. Plaintiff suffered defamation, wrongful
dismissal, physical and financial hardship and strain, and acute mental and emotional anguish
due to the innumerable criminal acts and common law violations. Plaintiff has suffered two
attempts upon his life and the torment of imminent further attempts from an ongoing murder
plot in order to silence him as key witness to crimes committed by Boeing Company
and US Government Officials. (See link: 'Synopsis of the Case').
Those crimes have yet to be addressed or the criminals apprehended....
CITIZEN KEYTER vs THE CONSPIRATORS
August 11, 2009
Boeing to pay $2 million in
BY GUILLERMO CONTRERAS, SAN ANTONIO EXPRESS-NEWS
The Boeing Co. has agreed to pay $2 million to the Justice Department to settle a
whistleblower's claims that the contractor cheated taxpayers by falsifying billing records at a
San Antonio plant that maintains Air Force planes.
The litigation, filed in 2006 by former Boeing employee Edward Quintana, claims Boeing
manipulated records to show more people had been making repairs or maintenance on KC-135 tankers when it was usually just one person -- Quintana.
The lawsuit had been kept secret for three years as the Justice Department looked into
his allegations, and then joined the suit.
Federal law requires such "qui tam" lawsuits to proceed under seal until the government
feels they are ready to be made public. The suit was unsealed by the U.S. attorney's office
after Assistant U.S. Attorney Harold Brown Jr. helped negotiate the settlement.
Quintana, under federal law, is entitled to 15 percent to 25 percent of the $2 million payout,
according to his lawyers, Glenn Grossenbacher and John Clark.
Despite settling, Boeing denies the allegations and is separately fighting Quintana over his
claims that he was wrongly terminated.
"We cooperated fully with the government during the course of the negotiations with this
settlement," Boeing spokeswoman Deborah Vannierop said. "In the negotiations, Boeing
denied it had made any false claims. The settlement is consistent with Boeing's denial.
Further, we have taken action to correct internal charging issues. In no time was readiness
compromised during the internal charging issue ... We continue to support the war fighter
by keeping the KC-135 mission-ready."
Quintana claims Boeing made false claims at what was formerly known as the Boeing
Logistics Support System at then-Kelly USA in San Antonio. The former Air Force base is
now called Port San Antonio and the maintenance facility is now known as Boeing's Global
Services and Support San Antonio Facility.
The suit alleges that, for at least three years -- from 2002 to 2005 -- that Boeing plant
inflated its estimates of how many labor hours were required to do "non-routine" repairs and
maintenance tasks on the KC-135, and then falsified the records to inflate the number of
workers who did the repairs.
The work Quintana did involved maintenance of horizontal stabilizers on the KC-135
tankers, including removing paint, primer, coatings, corrosion, resurfacing, and, when
necessary, fabricating and installing titanium alloy shims and bushings.
But while it took Quintana eight or nine hours alone to do the work, the billing records were
changed to show "people who had never been near the plane," Grossenbacher said.
The change allowed Boeing to keep charging that amount as it renegotiated the contract.
"They didn't want anybody to get the idea that this job could be done in smaller numbers of
hours," said Clark, a former U.S. attorney in San Antonio.
Boeing started working on the KC-135 program depot maintenance in 1998. In September
2007, Boeing was awarded a 10-year contract, but competitors have protested that award.
Boeing continues to perform the work under a "bridge" contract while it is put up for bid,
Vannierop said. She declined to specify how much the contract award is for.
Vannierop also declined to address Quintana's claims that Boeing retaliated and fired him
because he reported the violations, citing ongoing litigation on those issues. But she said
the company encourages employees to report wrongdoing.
©1996-2009 Seattle Post-Intelligencer
* * * * *
GOOGLING FOR BOEING
BRIBES & BOONDOGGLES
EARL & LYN ANZAI
DAVID C. FARMER
JUDGE ROBERT FARIS
JUDGE LLOYD KING
* * * * *
March 1, 2008
Airbus parent beats Boeing for
big U.S. Air Force contract
By Leslie Wayne, International Herald Tribune
WASHINGTON: The U.S. Air Force, in a stunning decision against Boeing, awarded a
$40 billion contract for aerial refueling tankers Friday to a partnership between Northrop
Grumman and the European parent of Airbus, putting a critical military contract partly
into the hands of a foreign company.
The contract, one of the largest at the Pentagon, has the potential to grow to $100 billion. It
is also a sign of the growing influence of foreign suppliers within the Pentagon and breaks
a decades-long relationship with Boeing, which built the bulk of the existing tanker fleet and
fought hard to land the new contract.
"This isn't an upset," said Loren Thompson, a military analyst at the Lexington Institute, a
Washington-area research group. "It's an earthquake."
Under the contract, Northrop and the parent of Airbus, European Aeronautic Defense &
Space, or EADS, would build a fleet of 179 planes, based on the existing Airbus 330, to
provide in-air refueling to military aircraft, from fighter jets to cargo planes. It gives a huge
lift to EADS, whose commercial aviation program has suffered a number of setbacks in
While final assembly of the craft would take place at an Airbus plant near Mobile, Alabama,
parts would come from suppliers across the globe.
At a news conference, air force officials said the creation of domestic jobs was not a factor
in the decision. In response to questions about possible negative reaction to the deal in
Congress, General Arthur Lichte, head of the air force's air mobility command, said, "This
will be an American tanker, flown by American airmen with an American flag on its tail and,
every day, it will be saving American lives."
Reaction from some in Congress, however, was swift.
"We are outraged that this decision taps European Airbus and its foreign workers
to provide a tanker to our American military," the delegation from Washington State
said in a joint statement. Boeing planes are assembled outside Seattle. "This is a blow to
the American aerospace industry, American workers and America's men and
women in uniform."
For its part, Boeing, which had been considered the strong favorite to retain the contract,
said it was "very disappointed" in the outcome. But it did not say whether it would file a
formal protest - something General Michael Moseley, chief of staff of the air force, has
said he hopes the losing bidder will not do because it would only further delay the tanker
In its statement, Boeing said, "We believe that we offered the air force the best value and
lowest risk tanker for its mission." The company added that only after a debriefing by the
Pentagon would the company "make a decision concerning our possible options, keeping in
mind at all times the impact to the warfighter and the nation."
A Boeing victory was considered so certain that many Wall Street analysts had already
factored the contract into their economic forecasts for the company and led one senator,
Kay Bailey Hutchison, Republican of Texas, to prematurely send out a press release
praising Boeing for its victory.
The air force decision is also a surprise ending to a protracted contracting process that
went on for nearly a decade and became mired in scandal and international politics.
Senator John McCain, the presumptive Republican presidential candidate, had scuttled
an earlier attempt by the air force to award the contract to Boeing, opening the door
for the Northrop-Airbus bid.
McCain's campaign spokeswoman referred calls to his Senate office, which could not be
reached for comment.
Norm Dicks, a Washington Democrat who is a member of the House Appropriations
Committee Defense Subcommittee, said he was attending an anticipated victory party at
Boeing's Washington headquarters when the mood suddenly darkened.
"Here we are in the middle of a recession and we give this to Airbus?" Dicks added.
"That is not going to go down well."
Ronald Sugar, the chief executive of Northrop Grumman, said in a telephone interview that
he expected members of Congress would have a "variety of views" depending on whether
their districts would be gaining or losing jobs under the deal.
He said that 60 percent of the content of the new tanker would come from the United States
and that the contract would create 2,000 jobs in Mobile and 25,000 overall in the United
"This is more about the capability that we will give to the kids fighting the wars and the cost
to the taxpayer," he said.
Backing Sugar's view was Senator Richard Shelby, Republican of Alabama, who hailed
the decision as "great news for Alabama."
The Alabama and Mississippi delegations had lobbied hard in Congress to polish the
image of Airbus. In Paris, at the annual air shows, Airbus officials and these politicians
proudly displayed the proposed European tanker offering and made the argument that if the
United States wanted to sell its weapons to European countries, it should also open
its doors to foreign suppliers....
Replacing these tankers has been the air force's top priority since 1996, when the
government first proposed obtaining new planes. The first 179 tankers will be acquired at a
pace of about 15 a year. But it is expected that, over time, nearly 400 new refueling planes
will be needed, which could bring the program's total cost to $100 billion.
For more than a decade the air force's effort to modernize the fleet has been thwarted by
global politics, Washington scandals and an aggressive attack by McCain, a member
of the Senate Armed Services Committee.
In the end, a procurement scandal led to the departure of Philip Condit, the chief executive
of Boeing, the resignation of James Roche as air force secretary and the imprisonment of
two Boeing executives, one of whom had worked on the program as a Pentagon acquisition
The air force, short on cash and wanting to acquire the planes as fast as possible,
proposed an arrangement to Congress in late 2001 under which the Pentagon would lease
the Boeing 767s in a sole-source contract that would keep Boeing's aging 767 production
But just as the air force was about to sign that deal, it came under sharp attack from
McCain, a former navy pilot. He denounced the deal as a sweetheart arrangement
between Boeing and the air force that had been arranged with insufficient scrutiny and
oversight, and that would shortchange the taxpayer.
Soon afterward, it was reported that the air force's No. 2 weapons buyer, Darleen Druyun,
had been promised jobs for herself, her daughter and son-in-law in return for
steering the tanker contract and billions of dollars of other air force business to
Boeing. Soon after joining the company in a $250,000-a-year post, Druyun and Michael
Sears, Boeing's former chief financial officer, pleaded guilty and received prison terms.
The weight of the scandal caused the deal to collapse in 2004 and opened the door to
Each side spent millions to sharpen its proposal, hire lobbyists and former generals to
argue their case and wage extensive advertising efforts in Washington and at military
January 14. 2008
Bush Brings Promise of Arms Sale
on First Visit to Saudi Arabia
Janine Zacharia and Holly Rosenkrantz
Jan. 14 (Bloomberg) -- President George W. Bush brought to Saudi Arabia today a promise
to provide “smart bomb” technology for his host, as the U.S. leader made his first visit to a
crucial ally in the Middle East.
Saudi King Abdullah had his own gift for Bush, a heavy, gold necklace and medallion that is
a sign of friendship and respect, a theme Bush is seeking to push during his two-day visit to
the kingdom at a time when oil prices are hovering around $100 per barrel.
The administration announced today it was formally notifying Congress of its plans to sell
Boeing Co.'s satellite-guided smart-bomb kits to the Saudis. The package is part of a
broader sale to Persian Gulf allies of as much as $20 billion in arms to shore up
support against Iran's nuclear ambitions.
The visit is an opportunity for the two leaders to ``renew their ties,'' National Security
Adviser Stephen Hadley told reporters aboard Air Force One en route to Riyadh.
Relations between the U.S. and Saudi Arabia have been fraught since the U.S. led
an invasion of Iraq in 2003 against Saudi advice.
On the Saudi agenda for meetings during the next two days is pressing the U.S. for
stronger efforts to help create a Palestinian state, talks about U.S. plans in Iraq, and
dealing with Iran's nuclear program through diplomacy.
Little has been said publicly about oil prices as Bush has made his way through four of the
world's major producers: Kuwait, Bahrain, the United Arab Emirates and now Saudi
Arabia, which alone produces 25 percent of the world's oil.
``They talked about oil,'' Ed Gillespie, Bush's senior adviser, said when pressed on the
issue. Bush and the Arab leaders discussed the ``vast demand'' in the world market. Bush
said alternative energy was a part of his agenda and also mentioned the need for more
That was as specific as a statement on oil given by any White House official during the trip.
Hadley refused to predict whether oil would be discussed in Bush's one-on-one meeting
with Abdullah tonight.
The state of the U.S. economy and financial markets also topped the Arab leaders'
concerns. Bush reassured leaders of the United Arab Emirates that their investment is still
welcome in the U.S. after U.S. lawmakers in 2006 forced DP World, based in Dubai, to
drop a bid to run American ports.
They asked if ``investment by the UAE is welcome in the United States'' and the
``president reassured them that it very much was, that the United States is open for
foreign investment,'' Hadley said.
Bush also reassured the UAE leadership that the ``underlying fundamentals'' of the U.S.
economy remained sound, Hadley said.
Many officials also have asked questions about the U.S. presidential campaign. Gillespie
said one official, who he didn't identify, asked him who he thought would win the Michigan
primary tomorrow night.
During this trip, Bush has powered through an intensive schedule of cultural events. Last
night he admired falcons and feasted on a Bedouin-styled dinner in the UAE desert.
Today, he visited the historic home of Sheikh Saeed al Maktoum, the grandfather of the
current ruler of Dubai in the UAE.
There Bush was greeted by young girls who sang and danced for him, while Secretary of
State Condoleezza Rice, accustomed on her own trips to a punishing schedule of
diplomatic meetings, sipped a fresh strawberry juice alongside Bush's other top aides.
Bush visited a Dubai cultural center and then met with young Arab leaders and
entrepreneurs atop Dubai's boat-shaped luxury Burj al Arab hotel.
Tomorrow, Bush will again set aside high diplomacy and visit a national history museum
and King Abdullah's ranch.
Asked to explain the timing and significance of Bush's sudden late-in-his-presidency
cultural touring, Hadley said: ``It's a good part of getting him to see and be seen in the
To contact the reporter on this story: Holly Rosenkrantz in Riyadh, Saudi Arabia at
email@example.com ; Janine Zacharia in Riyadh, Saudi Arabia at
January 5, 2006
Norway pulls investments in seven
multinationals over ethical concerns
Groups producing nuclear arms components
Norway has withdrawn investments of more than 500 million dollars (413.6 million euros)
from seven multinational corporations, including Boeing and Honeywell of the US, due to
ethical concerns over the groups' production of nuclear arms components, the
government said on Thursday.
The five other companies are BAE Systems of Britain, Safran of France, Finmeccanica
of Italy, and US groups Northrop Grumman and United Technologies.
The withdrawal follows a recommendation from Norway's Advisory Council on Ethics, which
is tasked with monitoring the ethics of companies in which Norway places its massive state
Pension Fund, formerly known as the Oil Fund.
Norway's finance minister asked the central bank, which manages the fund, to sell the
holdings, worth 3.3 billion kroner (416.2 million euros, 502 million dollars). They were sold
last year, Finance Minister Kristin Halvorsen told reporters on Thursday. "This does not
mean that there won't be other companies (excluded)... Our work will continue," she
Norway, however, did not withdraw its stake in French oil group Total, in line with the
Advisory Council's recommendation. Total has been criticised by several humanitarian aid
groups for its controversial business dealings in Myanmar, formerly Burma, which is run by
a military junta....
The Advisory Council said it saw "no direct link today between the human rights violations
committed by the Myanmar regime and Total's activities in this country." The Norwegian
Burma Committee said it was "very disappointed" by the decision. According to the most
recent statistics available, the Norwegian state holds 0.679 percent of Total.
Norway's state Pension Fund, into which the state deposits its massive oil and gas
revenues, is one of the richest funds in the world. At the end of September 2005, it was
worth 1,281.1 billion kroner (161.4 billion euros, 195.2 billion dollars). The sheer size of
the fund enables Norway to exert pressure on companies to ensure that their operations are
ethical. Norway is the world's third-largest oil exporter behind Saudi Arabia and Russia.
The Scandinavian country has already withdrawn its stakes in 10 other companies,
including Thales of France, European Aeronautic Defence and Space Company, and
US groups General Dynamics, Lockheed Martin and Raytheon. They are accused of
helping manufacture cluster bombs, devices which are particularly lethal for civilian
March 29, 2005
Pentagon Strips Air Force of
21 Major Weapons Programs
Las Vegas Review-Journal
WASHINGTON (AP) - In a highly unusual move, the Pentagon’s top weapons buyer on
Monday took away the Air Force’s authority to oversee 21 major programs with a combine
value of $200 billion.
The move, called temporary, was made because of a civilian leadership vacuum at the Air
Force after the departure last week of Peter Teets, who was under secretary of the Air
Force as well as acting secretary. Teets had been fillin in since James Roche resigned as
secretary in January.
It also comes amid continuing controversy over the Air Force’s handling of a multibillion-dollar Boeing aircraft lease deal that fell through last year and led to the conviction of former
Air Force executive Darleen Druyun on charges of conspiring to violate conflict-of-interest rules.
Druyun admitted in court that she favored Boeing on deals worth billion of dollars
because the company gave jobs to her daughter and son-in-law. Her admission led
to a detailed Pentagon review of her nearly 10-year tenure as a key weapons buyer for the
Air Force and prompted rival defense companies to file protests over Boeing contracts
awarded during that period.
The episode has taken a tool on the Air Force. Since Roche departed, the White House
has not nominated anyone to replace him as the Air Force secretary, a post that requires
Senate confirmation. Some believe the current Navy secretary, Gordon England, will get
In addition, no one has been nominated to replace Teets as the under secretary. What’s
more, the post of Air Force acquisition chief has been vacant since Marvin Sambur left in
With Teets gone, the most senior civilian in the Air Force is Michael I. Dominquez, who
has served since August 2001 as assistant secretary of the Air Force for manpower and
In Monday’s announcement, the Pentagon said it was giving the decision-making authority
for the 21 major Air Force weapons programs to Michael Wynne, the No. 2 Pentagon
civilian in charge of weapons procurement.
The No. 1 slot has not had a Senate-confirmed holder since May 2003. Wynne was
nominate for the top spot but his nomination – and others in the Air Force – have been
blocked by Sen. John McCain, R-Ariz, as part of a long-running dispute over the Boeing
The 21 programs include a $59.2 billion Boeing contract for C-17A Globemaster II
advanced cargo aircraft, and a $31.7 billion Boeing and Lockheed Martin contract for
the Evolved Expendable Launch Vehicle....
Among other programs affected are air-to-air missiles, B-2 bomber radar modernization, C-5 cargo plane improvements, propulsion replacement for the Minuteman III intercontinental
ballistic missile and a $18 billion communications satellite program....
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March 8, 2005
Boeing Forces Out CEO Over
Ethics Scandal Involving Affair
By Dave Carpenter, Associated Press
CHICAGO - Boeing Co., CEO Harry Stonecipher, brought back from retirement 15
months ago to boost the aerospace manufacturers’ tainted image, has been forced out
because of a new ethics scandal involving an affair he had this year with a female
In a stunning announcement that left the exact circumstances behind the ouster unclear,
Boeing said Monday the 68-year-old- president and chief executive officer had resigned at
the board’s request a day earlier for improper behavior while carrying out the consensual
Chairman Lew Platt said the affair by itself did not violate the code of business
conduct at the company, where a string of defense scandals has raised questions
about the way Boeing obtains its lucrative contracts. But an internal investigation that
started because of an employee’s complaint discovered “some issues of poor judgment”
involving Stonecipher, who is married.
Platt refused repeated requests to be more specific and did not identify the female
executive, who he said remains with Boeing....
< < < FLASHBACKS < < <
Program Manager Interviews
ASSISTANT SECRETARY OF DEFENSE FOR ECONOMIC SECURITY
~ ~ ~
Which Defense Firms Will Survive – Meet the
Man Who Helps the Pentagon Decide
A large white banner is first thing you notice upon entering the reception area of Joshua
Gotbaum’s third-floor Pentagon office. In foot-high red letters, it reads: “Please Mr.
Gotbaum, Save Natick [Mass.] Labs” (referring to the Base Realignment and Closure
[BRAC] recommendation to close Natick),
Secretary Gotbaum, a former Wall Street investment banker, achieved the status of
Washington insider in 1 short year. He is respected both by the Pentagon brass
and defense industry officials. He influences key decisions ranging from BRAC to
which defense industries will survive.
Secretary Gotbaum is the right man for the job at the right time. A 44-year-old lawyer,
Secretary Gotbaum is at home in the world of mergers, acquisitions, and restructurings.
He heads the new 260-person Pentagon Office of Economic Security and has won the
confidence of many defense industry and military officials for helping educate the Pentagon
brass on their decisions which impact the nation’s troubled defense industry. And so far,
both sides appear pleased with his efforts or their behalf....
www.dau.mil/pubs/pm/pmpdf95/gotbaum.pdf For more recent poop on Joshua Gotaum, GO TO > > > Hawaiian Airlines
$ $ $
Spotting the Boeotians
From The Outlaw Bank: BCCI, by Jonathan Deaty & S.C. Gwynne:
Kamal Adham was one of the true inside power players of the Middle East, a shrewd, jovial
man who had for decades straddled the worlds of Middle Eastern business and politics..
He was the half brother of Iffat, the favorite wife of King Faisal, who ruled Saudi Arabia
from 1964 until his death in 1975....
Like so many other enterprising Arabs in the 1960s and 1970s, when oil revenues were
booming and foreign companies were lining up to sell their products, Adham had used his
connection to commercial advantage. The way most commoners in the Middle East got rich
off the oil boom was through a simple system know as “agency” arrangements.
In order to sell a product or service in Saudi Arabia, you had to know someone in the royal
family, which authorized all expenditures. If you did not know a princeling or a royal cousin,
then you hired an “agent” who provided you access for a “commission.”
Though this commission often looks very much like a “bribe” ... it was nonetheless the way
business was done, and few were better at it than Kamal Adham.
The list of his agency deals was long and illustrious....
By the mid-1960s Adham’s influence was such that he simultaneously came to represent
three defense firms and was being ardently courted by a fourth. Said Northrop
representative Kermit Roosevelt, “Adham already has a piece of the Lighting deal, the
Mirage deal, and the Lockheed deal and is trying to complete the square by an
arrangement with Northrup.”
He also came to be the principal broker for weapons purchased by Saudi Arabia on
behalf of Egypt.
But perhaps his richest contract was with Boeing Company, which paid him
millions of dollars in commissions to help it sell passenger jetliners to the fledgling
That and other similar transactions had led to a three-year investigation of Boeing’s
commission payments by the U.S. Securities and Exchange Commission, whose goal in
part was to figure out exactly who Boeing was using to accomplish these sleights of hand.
Curiously, in the words of a 1976 Wall Street Journal article, Boeing’s efforts to suppress
those names, particularly Adham’s, “has been accomplished with significant help from
the State Department, which entered a court fight between the SEC and Boeing to
argue that disclosure of Boeing’s ‘highly placed’ consultants abroad could harm
U.S. foreign policy interests.”
How could the mere disclosure of Adham’s name affect U.S. foreign policy? In two ways.
First, Adham was the head of the Saudi internal security service – arguably the most
important agency of the government, since it protected the royal family – and the General
Intelligence Directorate of Saudi Arabia.
In that role he was the principal liaison between the CIA and European intelligence
agencies, and he even had an agency code name: Tumbleweed.
In geopolitical terms, Adham was the five-hundred-pound gorilla of Saudi
intelligence, an outfit known and feared for its merciless hunts for dissidents and
brutal methods of repression....
But the second and more important foreign policy concern was that Adham was the
kingdom’s key link to Egyptian President Anwar Sadat in the years leading to the Camp
David accords in 1979 – the years following the 1973 war, when the Saudi-Egypt axis
acquired key strategic importance....
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July 25, 2004
Former Boeing CFO to Plead Guilty
NEW YORK (Reuters) - Former Boeing Co. Chief Financial Officer Michael Sears agreed
to plead guilty to conspiring to deceive the U.S. government about negotiations for a
contract to provide the Air Force with refueling jets, according to a report by Bloomberg
News on Sunday.
Sears is cooperating with federal prosecutors who are probing negotiations that Sears had
with a former Pentagon official who had been offered a job by Boeing, a report on
Bloomberg’s Web site said, citing an unnamed source.
The former Pentagon official, Darleen Druyun, pleaded guilty to the same charge in April,
and confirmed that she received the job offer while negotiating for the Air Force....
The investigation may delay the awarding of the $23 billion contract, which includes
providing the Air Force as many as 100 planes that refuel aircraft in mid-air.
The agreement to hire Boeing was suspended pending review in November, when Druyun
and Sears were fired from Boeing.
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July 17, 2004
Boeing settles sex discrimination case
Boeing Co. has agreed to pay between $40.6 million and $72.5 million and change some
practices to settle charges that it discriminated against 29,000 women who have worked for
Boeing in the Seattle area.
The settlement of the class-action suit filed in 2000 received preliminary approval in U.S.
District Court in Seattle yesterday. It calls on Boeing to change the way it determines
starting salaries, modify its performance-evaluations and monitor salaries and overtime to
reduce the risk of gender discrimination.
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July 6, 2003
Air Force deal with Boeing draws heat
Cox News Service
The Air Force needed tanker planes to refuel its jets.
Boeing Co. needed orders.
So the two got together and crafted what they see as a stroke of bureaucratic brilliance,
said Business Week (July 7) – a $19.6 billion deal to lease 100 new 767s to replace the
Air Forces’ rusting KC-135s tankers.
But the deal has drawn heat from all sides. Watchdog groups on the right and left see it as
a brazen Boeing bailout. Defense Department civilians say Boeing asked too much, and
others say a lease’s finance charges drive up the cost.
At least three congressional committees are looking into the deal.
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June 26, 2003
Ex-Boeing Workers Charged Over
By Renae Merle, Washington Post
Two former Boeing Co. employees were charged last night with stealing Lockheed Martin
Corp. documents to help Boeing win an Air Force contract.
The U.S. attorney's office in Los Angeles said William Erskine, 43, and Kenneth Branch,
64, face criminal charges of conspiracy, theft of trade secrets and violating the
Procurement Integrity Act. A lawyer who represented Erskine and Branch in a
wrongful-termination lawsuit against Boeing did not return a call for comment.
The charges mark the latest escalation in a four-year fight over a multibillion-dollar contract
to build the next-generation rocket launcher known as the Evolved Expendable Launch
Vehicle. Earlier this month, Lockheed Martin sued Boeing as well as Erskine and Branch,
accusing them of using corporate espionage to steal the high-profile Air Force contract.
"By covertly using a competitor's secret information, they caused harm not only to Lockheed
Martin, but also to the Air Force and taxpayers who finance government operations," U.S.
Attorney Debra W. Yang said in a statement. "Their improper conduct had huge
ramifications because of the value of the contract."
If convicted on all three counts, Erskine and Branch could be sentenced to a maximum of
15 years in prison and a fine of $850,000.
Boeing acknowledges that some employees "behaved unethically" during the
competition. The company fired Erskine and Branch in 1999 and has turned over more than
37,000 pages of Lockheed documents, including some that contained sensitive cost and
technical information and Air Force critiques of Lockheed's proposal.
Lockheed declined to comment on the charges. "We are cooperating fully with the Justice
Department's investigation and the Air Force's inquiry," said Boeing spokesman Daniel
The repercussions from the various investigations could profoundly affect Chicago-based
Boeing, industry analysts said. If the Air Force punishes the firm by reversing its decision
on the rocket-launch competition, the multibillion-dollar hit to the company's already
struggling space business would be severe, they said.
© 2003 The Washington Post Company
For more on Lockheed Martin, GO TO > > > Tarnished Wings
$ $ $
November 3, 2002
French defence company in bribery
scandal in Seoul
Dassault denies graft claims in Seoul
By Andrew Ward in Seoul and Victor Mallet in Paris, Financial Times
In March 2002, Dassault Aviation said it was the victim of a smear campaign after the
French aircraft manufacturer was accused in a corruption scandal embroiling the race for a
South Korean fighter jet contract.
The company denied bribing a South Korean air force colonel to improve its chances of
winning the deal to build 40 aircraft.
Newspapers in Seoul linked Dassault to a Won11m ($8,300, £5,900) sweetener allegedly
paid to the colonel in return for advice about the bidding process.
Dassault said it was being smeared by people that did not want its Rafale jet to beat
Boeing's F-15 to the estimated $3.2bn contract. "There's nothing between Dassault and the
colonel," a Dassault spokesperson told the FT.
"Everybody knows the evaluation process has put the Rafale at the top. We fear that there
is manipulation by people who are annoyed to see the Rafale at the top."
Any bidder proved to have paid bribes could be barred from the so-called FX contract,
which is among the biggest defence deals currently being contested.
The corruption scandal emerged when a colonel, identified by his surname, Cho, was
arrested on bribery charges. He is believed to be the same man that appeared on South
Korean television with his identity concealed, to allege that the selection process was rigged
in favour of Boeing.
Mr Cho was part of the air force's evaluation team that assessed the four bids -
Eurofighter's Typhoon and Russia's Sukhoi, the other two candidates, are considered
Dassault's more modern Rafale outstripped Boeing's ageing F-15 in flight tests,
according to information leaked to the South Korean press.
However, defence chiefs were reported to favour the US product because of Seoul's
close military alliance with Washington.
Last week, opposition lawmakers accused the government of succumbing to
political pressure from Washington to select the F-15.
Dassault said it was "totally confident in the transparency of the process".
Boeing denied involvement in the alleged bribery....
# # #
January 19, 2002
China Finds Bugging Devices on Jet
BEIJING - China has discovered 27 bugging devices in a U.S.-made Boeing 767 it
bought for the personal use of President Jiang Zemin, published reports said Saturday.
The tiny, highly sophisticated devices were hidden in the jetliner's upholstery, including in
the president's bathroom and the headboard of his bed, the London-based Financial Times
said, citing unnamed Chinese sources. It said Jiang was outraged at the discovery.
The bugs were discovered when they emitted static during a test flight after the plane's
delivery in August, the newspaper said. In a separate report, The Washington Post said
Chinese army communications experts found the bugs in October, days before the plane's
first official voyage. It said the jet is now sitting with its insides torn out on an air base north
The Washington Post report said Chinese officials blamed U.S. intelligence agencies for
the bugs. It said the incident would be raised during President Bush's Feb. 21 summit with
Jiang in Beijing.
The reports described the devices as satellite-controlled and more complex than those
available commercially. Chinese officials were puzzled as to how and when the bugs were
planted, the reports said. They had carefully monitored the plane's construction at the
Boeing plant in Seattle, Wash., and the fitting of its interior by several aircraft maintenance
companies in San Antonio, Texas.
Two of the companies, Gore Design Completions and Dee Howard Aircraft
Maintenance, issued a statement Friday saying they had received no complaints about
their work on the plane, the San Antonio Express-News reported.
''I know that we had no culpability whatsoever in this. All we did was put an interior in it,''
Jerry Gore, president of Gore Design, told the paper. The plane was parked in a Dee
Howard hangar and work began shortly after a contract was signed in October 2000, the
Express-News reported, continuing through a contentious period the following spring when
Beijing and Washington had a standoff over the forced landing of a U.S. Navy spy plane
and China's detention of its 24-member crew. Chinese officials were concerned
Washington would seize the plane, so security was tight, Gore told the Express-News.
The hangar was guarded by Dee Howard security staff and Chinese troops. The reports
said 20 Chinese Air Force officers and two employees of the China Aviation Supply
Export & Import Corp., which bought the plane, were being questioned. Officials at the
State Department in Washington and the U.S. Embassy in Beijing had no comment.
China's Foreign Ministry did not answer calls. Employees at the Chinese aviation company
refused to comment.
Randy Harrison, a Boeing spokesman in Seattle said he had no knowledge of the reports....
* * *
For a closer look at some of the Boeotian birds and
JUST BOOK YOUR FLIGHTS AND FOLLOW YOUR FANCY
Akin, Gump, Strauss, Hauer & Feld - One of the largest nests of Lobbyists
in the world.
In 1998, this firm declared total lobbying income of $11,800,000. Among their clients are
the likes of Alliance of American Insurers; America Online; American Express;
American Financial Group; Apollo Advisers; AT&T; Biotechnology Industry
Organization; Boeing Co.; Capital Gaming International; CBS Corp; Citigroup;
Korean International Trade Assn; Miller & Chevalier; National Hockey League;
Pfizer; PG&E Corp; Pharmaceutical Rsrch & Mfrs of America; Philip Morris; Pohang
Iron & Steel; Samsung Electronics; Sri Lanka Apparel Exporters Assn; AOLTime
Warner; and Warner-Lambert, just to mention a few.
* * *
December 11, 2001
The White House connection: Saudi 'agents'
close Bush friends
by Maggie Mulvihill, Jonathan Wells and Jack Meyers, Boston Globe
A powerful Washington, D.C., law firm with unusually close ties to the White House has
earned hefty fees representing controversial Saudi billionaires as well as a Texas-based
Islamic charity fingered last week as a terrorist front.
The influential law firm of Akin, Gump, Strauss, Hauer & Feld has represented three
wealthy Saudi businessmen - Khalid bin Mahfouz, Mohammed Hussein Al-Amoudi and
Salah Idris - who have been scrutinized by U.S. authorities for possible involvement in
financing Osama bin Laden and his terrorist network.
In addition, Akin, Gump currently represents the largest Islamic charity in the United States,
Holy Land Foundation for Relief and Development in Richmond, Texas.
Holy Land's assets were frozen by the Treasury Department last week as government
investigators probe its ties to Hamas, the militant Palestinian group blamed for suicide
attacks against Israelis.
Partners at Akin, Gump include one of President Bush's closest Texas friends, James
C. Langdon, and George R. Salem, a Bush fund-raiser who chaired his 2000 campaign's
outreach to Arab-Americans.
Another longtime partner is Barnett A. "Sandy" Kress, the former Dallas School Board
president who Bush appointed in January to work for the White House as an "unpaid
consultant" on education reform. . . .
For more, GO TO > > > Birds in the Lobby; The Nests of Osama bin Laden
Miller & Chevalier - A Washington, DC-based nest of Lawyers and Lobbyists.
From their web-site, 8/1/00: . . .
In 1920, Robert Miller and Stuart Chevalier founded Miller & Chevalier as the nation’s
first law firm specializing in tax matters. Mr. Miller had served as Solicitor and Mr. Chevalier
as Asst Solicitor of the Internal Revenue Service shortly after the first federal income tax
laws were enacted....
Like our firm’s founders, many of our tax lawyers have worked in federal government
Our firm’s tax practice is diverse, responding to the increasing complexity of the
international tax system and the need for Washington representation to deal effectively with
important tax policy issues. We serve clients in numerous industries: ... aerospace,
automobile, banking and finance, natural resources and energy, chemicals, electronics,
pharmaceutical, retail, and health care insurance....
Our firm represents over half of the Fortune 50 companies. We also work with foreign-owned companies of similar size ...
* * *
Taxation - Representative Engagements
Amoco Corp v. Commissioner (a.k.a. US Taxpayers) . . . The U.S. Court of Appeals ...
held that Amoco was entitled to foreign tax credits for Egyptian income taxes paid on its
behalf by the Egyptian National Oil Co . . . The amount of the asserted deficiency was
over $450 million....
Atlantic Richfield Co v. Commissioner (a.k.a. US Taxpayers) . . . This case involves
over 200 issues and a deficiency in excess of $700 million. Some of the issues involve
hedging, tax accounting, foreign source income, and capitalization questions....
B.F. Goodrich v. United States (a.k.a. US Taxpayers) . . . This case involved whether
interest expenses incurred on corporate owned life insurance were deductible. The
taxpayer sought a refund of approximately $2.5 million. The case was settled. . . .
The Boeing Co v.United States (a.k.a. US Taxpayers) . . . This case involves the
allocation and apportionment of research and development expenses for purposes of
computing combined taxable income for DISC/FSC purposes. The taxpayer is seeking a
refund of over $450 million. The District Court granted Boeing’s motion for summary
judgment; the govt’s appeal to the Ninth Circuit is pending. . . .
Cheng v. Commissioner and Pen v. Commissioner . . . The issue in these companion
cases was whether commissions earned as compensation for the performance of personal
services in Taiwan were taxable as income effectively connected to a U.S. trade or
business. The total amount at issue exceeded $40 million in deficiencies, penalties, and
interest. The government conceded. . . . (Those must have been some personal services!
I wonder what kind?)
Exxon Corp v. Commissioner (a.k.a. US Taxpayers) . . . The Tax Court held that the
Commissioner’s proposed allocation of over $6.5 billion in income was precluded under
Code sections 61 and 482 due to a foreign legal restriction. . . .
General Electric Co v. Commissioner (a.k.a. US Taxpayers) . . . This case involved
whether the taxpayer properly elected ... to deduct currently approximately $118 million in
research and development expenses.
~ ~ ~
In addition to their legal services, Miller & Chevalier declared lobbying income of $1.4
million in 1998, with total lobbying expenditures of $320,000 (all to the lobbying firm of
Among Miller & Chevalier’s lobbying clients: Assn of Financial Service Holding Cos;
Atlantic Richfield; Blue Cross/Blue Shield; Boeing Co; Boston Edison; Chevy Chase
Bank; Gallo Winery; Monsanto Co; Nuclear Fuel Services; and the Arkansas-based
For more, GO TO > > > Buzzards of Paradise
Philip Condit - Chairman and Chief Executive Officer, BOEING CO.
From the Boeing website (www.boeing.com):
Phil Condit is chairman and chief executive officer of The Boeing Company, the world’s
largest aerospace company. As the largest manufacturer of satellites, commercial jetliners,
and military aircraft, the company employs close to 167,000 people and serves customers
in 145 countries. It is also a global market leader in missile defense, human space flight,
and launch services. Boeing has headquarters in Chicago, Ill., and is the largest exporter in
the United States, with revenues of more than $54 billion in 2002.
Under Condit’s leadership, several mergers and acquisitions have transformed the
company into a broad-based, global enterprise. The acquisition of Rockwell Aerospace,
the merger with McDonnell Douglas and the addition of Hughes Space &
Communications has established a company with great strength and breadth. Today,
Boeing is strongly positioned in commercial airplanes, defense, space, information
technology, financing, and communications.
Elected president and member of the board of directors of Boeing in 1992, Condit added
the title of chief executive officer in 1996. In 1997, he was elected chairman. He is the
seventh chairman since the company was founded in 1916....
Condit serves on the board of Hewlett-Packard Company, is co-chairman of the Trans
Atlantic Business Council, chairs the United States––China Business Council, and is
a member of the Business Roundtable.
Elected a member of the National Academy of Engineering in 1985, he is also an honorary
fellow of the Royal Aeronautical Society and an honorary fellow of the American Institute of
Aeronautics and Astronautics. He belongs to the Society of Automotive Engineers and has
chaired the NASA Advisory Council’s Aeronautics Advisory Committee....
A native of Berkeley, Calif., Condit was born on Aug. 2, 1941. He has been an aviation
enthusiast his entire life and earned a pilot’s license at the age of 18.
* * *
From AFL-CIO Executive PayWatch ... (www.aflcio.org) ...
In 2001, Philip Condit raked in $4,037,035 in total compensation including stock option
grants from BOEING CO.
And Philip Condit has another $3,897,304 in unexercised stock options from previous
Technology Strategies and Alliances - Another company that knows the
meaning of “quid pro quo”.
From The Buying of the President: . . .
Defense Dollars and Deal Making
In Feb of 1995, the administration announced that for the first time it would consider the
financial state of U.S. defense contractors when negotiating overseas arms sales. The
administration has also pushed to relax export restrictions on high-tech equipment used to
manufacture sophisticated weapons systems.
Part of what has ingratiated the Clinton administration to weapons manufacturers has been
the presence of William J. Perry, first as Deputy Secretary and later as Secretary of
Perry is a former defense consultant who headed Technology Strategies and Alliances
(TSA) between 1985 and 1993. TSA’s 1994 clients included Boeing, Grumman,
Lockheed, Martin Marietta, McDonnell Douglas, Northrop, Textron, Texas
Instruments, TRW, Westinghouse, and 20 other defense contractors.
While Perry severed his ties with the company, he had amassed more than a million dollars
in consulting fees from TSA’s clients. Not long after he joined the Defense Department,
Perry began going to bat for the industry.
One of Deputy Defense Secretary Perry’s extra base hits came when he and then-Defense
Undersecretary for Acquisitions and Technology John Deutch quietly agreed to provide
U.S. defense contractors with taxpayer-finance subsidies for mergers and acquisitions.
That was a dramatic shift in Pentagon policy. Usually, such issues are taken before
Instead, Deutch, in a July 21, 1993 memo, reversed the Pentagon’s ban on the subsidies
and underwrote $270 million worth of TSA client Martin Marietta’s acquisition of General
Electric’s Aerospace Division.
Just seven weeks earlier, on June 3, 1993, industry CEOs, including Martin Marietta’s
Norman Augustine, had sent a letter to Perry and Deutch asking for DOD funding of
“restructuring costs” for mergers and acquisitions. Perry also approved Northrop’s $2.1
billion acquisition of Grumman. Both were TSA clients. The Pentagon called the policy
shift a “clarification” that did not require congressional consent....
The policy shift required both Perry and Deutch to seek ethics waivers from rules that call
for a one-year “cooling off” period before Pentagon officials can deal with former clients.
They got them from then-Defense Secretary Les Aspin, whom Perry replaced in February
Paul Kaminski got an ethics waiver in November of 1994, when he was named to head the
Pentagon’s Acquisitions and Technology Department, replacing Deutch.
Deutch remained in the Pentagon loop a while longer and became Deputy Secretary of
Defense before moving to the CIA.
Kaminski, who worked at TSA, is responsible for awarding $43 BILLION in defense
programs to Pentagon contractors.
The Kaminski appointment marked the first time former defense industry consultants filled
the Pentagon’s top three policy posts....
For more, GO TO > > > Nests in the Pentagon
Thayer Capital Partners - A private equity investment fund where some very big
birds privately nest.
June 29, 1998
Thayer Capital Partners Makes Its Mark as a New Player Among
Old-Time Investment Firms
By Jerry Knight, Washington Post
In an office 31 floors above Park Avenue in New York, a congregation of executives,
lawyers and investment bankers is scheduled tomorrow to perform a ritual symbolic of
contemporary business trends: the marriage of two companies.
If all goes as planned, three hours of voting and affirming, signing and witnessing will join
together the two telemarketing firms to create Aegis Communications Inc., a $230
million-a-year business that will have 8,500 employees, offices in 30 cities and shares
traded on the Nasdaq Stock Market.
Playing matchmaker, as well as mother of the bride and dowry donor, is Thayer Capital
Partners, Washington's newest player in the big-money private investment business.
Two-year-old Thayer is the newest of the financial powerhouses that have emerged in
Washington in the past five years as the mid-Atlantic region has grown into a world-class
player in finance and technology.
Washington's "old money" institutions, symbolized by Fannie Mae and Freddie Mac, has
been joined by a clique of newcomers, including Friedman, Billings, Ramsey Group Inc.
of Arlington, one of the nation's largest underwriters of new stock offerings; J.E. Robert
Co. of McLean, a real estate investment empire soon to expand into Asia; and Carlyle
Group, the merchant banking firm that Thayer resembles on a smaller scale.
Thayer, bankrolled by two dozen banks, pension funds and financial institutions
that put up $364 million in capital, has invested in businesses as varied as mail-order
meat sales, multinational bicycle manufacturing, travel wholesalers and telemarketing.
Almost $40 million has gone into the Aegis telemarketing group, one of several Thayer
investments that are turning the crucial corner from private ownership to publicly financed
companies, allowing Thayer to convert its equity in the private companies into stocks that
can be sold.
One of Thayer's eight portfolio firms, meat marketer Colorado Prime Foods, has
produced no gains after a year, a disappointment in a business in which investors demand
a quick payback. Two other deals have been done in the past few weeks, but its earlier
investments are on the fast track:
Aegis, an unusual "reverse IPO" in which a large privately held Los Angeles-based
company backed by Thayer will go public by merging with a smaller, Dallas company listed
on Nasdaq. Thayer will end up owning about 38 percent of the stock of the companies that
handle phone inquiries for client companies and make telephone sales calls.
Global Vacation Group Inc., a Washington-based travel wholesaler that is planning a
conventional IPO later this summer to raise $63 million.
Derby Cycle Corp., with headquarters in Nottingham, England, raised $160 million last
month by selling bonds in the United States and Germany.
Software AG Systems Inc. of Reston -- which has given Thayer the kind of home run that
big investors often long for but rarely hit. The $29.7 million investment was worth more
than $460 million after Software AG stock soared to a record $32.25 Friday.
Based on its track record with those companies, Thayer is talking to institutional investors
that put money into its first fund about raising a second pool of capital. With this funding,
the firm would have as much as $1 billion to make more investments.
Though Thayer has been in business in its existing form for only a little more than two
years, Thayer's players are three longtime starters in the big leagues of business:
Company founder Fred Malek, 62, who first made a name in Washington as a top aide to
President Richard M.Nixon.
Malek went on to become president of Marriott Corp. of Bethesda and then was president
of Northwest Airlines after leading a buyout of that company with fellow Marriott alumni Al
Cecchi and Gary Wilson.
Malek led a management buyout of CB Commercial Real Estate Group, then returned to
the hotel business, forming a pair of hotel investment partnerships and arranging a buyout
of the Ritz-Carlton hotels in partnership with Marriott.
Paul G. Stern, 59, was a top corporate manager before he got into the buyout business as
a partner in Forstmann Little & Co. in 1993. By then his resume listed stints as chairman
of Braun AG in Germany, vice president for strategic planning and acquisitions of
Rockwell International Corp. and president of Burroughs Corp. He spent four years as
chairman of Canada's Northern Telecom Ltd. before joining Forstmann.
Rick Rickertsen, 38, hooked up with Malek in 1994 after working at Hancock Park
Associates, a Los Angeles venture capital and buyout firm and Brentwood Associates,
the biggest venture capital investor in Southern California. He worked on Thayer's two hotel
funds and the Ritz-Carlton transaction. He also has coordinated fund-raising for Thayer
Equity Investors III, the partnership behind the company's current deals.
The principals are backed by a coterie of apprentice dealmakers -- half a dozen Harvard
MBAs -- a small support staff and a heavyweight advisory board that includes Washington
power lawyer Vernon Jordan; former vice presidential nominee Jack Kemp; Frank Zarb,
chairman of the National Association of Securities Dealers; Jim Robinson, former
chairman of American Express Co.; and Drew Lewis, former transportation secretary
and current chairman of Union Pacific Corp.
"Fred Malek is the driving force. He has built a very fine and very focused organization,"
said Ed Mathias, a principal at Carlyle Group, Washington's bigger and better-known
buyout firm. Malek and Stern have the management experience and worldwide contacts
essential for success in the relationship-based business, he said, while Rickertsen "is the
right age and the right kind of guy" to complement the two veterans.
"With the people they have now and the results they have shown, they should be able to
raise a sizable amount of money," Mathias said.
Target Return: 30 Percent
Though they are in the same business, Thayer and Carlyle do not compete directly for deals
or financing. Much of Carlyle's funding comes from overseas and is focused on bigger
deals and venture capital, which are not part of Thayer's strategy.
In the taxonomy of finance, Thayer Capital Partners is classified as a private equity
investment firm, which means it generally invests in privately owned companies rather than
publicly traded companies. It also is considered a leveraged buyout firm because, in
addition to its own capital, it uses borrowed money to finance transactions.
The money that Thayer invests comes from two dozen investors, most of them institutions.
Backers include the pension funds of AT&T Corp., Boeing Co., Textron Inc. and
Aluminum Co. of America; Howard Hughes Medical Institute; Hawaii's Bishop
Estate; Travelers Insurance Co. (now owned by Citigroup); CreditSuisse First
Boston; Bank of Nova Scotia; and Dresdner Bank.
There also is one individual investor -- Roger Penske, the race car driver turned truck and
Pension funds put most of their money into conservative investments intended to produce
a return with little risk, but they usually allocate a small part of their cash to venture capital
and buyout funds with more ambitious profit goals.
Thayer's target is a return on investment of 30 percent a year, a goal the company told
investors two years ago when it set out to raise its pool of capital. The original plan was to
raise $250 million -- enough to finance a dozen or so of what are considered medium-sized
deals these days -- but eager investors pledged $364 million. The fund is officially named
Thayer Equity Investors III LP.
Thayer I and Thayer II are a pair of hotel real estate partnerships set up previously by Malek
and named for one of his favorite figures, Col. Sylvannus Thayer, the father of West
Point, Malek's alma mater.
Thayer's three partners also put their own money into the company's deals so they can
share directly in the profit. But the primary source of the company's earnings is based on
what is considered the standard formula for the industry: Thayer gets 20 percent of the
profit it generates, after expenses.
"The key to our business is to make a good rate of return for our partners," Rickertsen said.
Investors measure performance as internal rate of return -- how much they make on their
original investment every year. The longer a transaction takes to produce a profit, the more
money the partners expect, he said. "The IRR clock is vicious. Time is very, very critical."
To boost the return Thayer borrows money -- using "leverage," in financial jargon.
"Our style is to use debt and equity in every deal," Malek said. If you spend $100 million to
buy a business and sell it a year later for $150 million, you earn a 50 percent profit on your
investment, he said. But if you put up $25 million of your own cash and borrow the rest, you
double your money -- for a 100 percent return.
"Our objective is to put a fairly sizable amount, but a prudent amount, of leverage into the
transactions," Malek said, stressing "prudent." In the 1980s, buyout firms like Thayer often
had only 8 percent to 10 percent equity in their investments, he said. Today Thayer's capital
structure typically includes one-third equity, two-thirds debt.
But in practice, the structure of Thayer's investments is much more complicated than
simply buying stock and borrowing money. The prospectuses of Thayer companies selling
stock to the public are replete with multiple classes of shares, convertible preferred stocks
and other exotic securities, often engineered by Rickertsen.
For example, Thayer made its investment in one company half in common stock and half in
convertible preferred stock, paying a deferred dividend of 20 percent a year. If the value of
the company's stock increases as hoped, Thayer will pass up the dividends, convert the
preferred to common and sell it for a big gain. If that doesn't happen, the dividend provides
While the kind of investing Thayer does can be risky, Rickertsen acknowledged, it's not as
risky as venture capital. Investors expect to lose the venture capital they put into some
start-up companies -- and routinely do. Thayer, instead, invests in companies with assets
that can be sold and cash flow that can be tapped to repay investors. The worst that can
usually happen is that Thayer will get all or most of its money back. It won't make a profit,
but it won't be wiped out.
Malek said he likes technology companies but avoids ventures in which success depends
on a technological breakthrough and ailing companies seeking financing for a turnaround.
But Malek is willing to start his own companies from scratch, launching three ventures in
the travel business, which he knows well from his days at Marriott and Northwest.
For those ventures, Malek recruited Roger Ballou, who has served as president of Alamo
Rent-a-Car Inc. and American Express's travel services group.
Thayer is backing Ballou in Global Vacation Group Inc., a Washington company that is
buying travel tour wholesalers and Associated Travel Network. Associated is a collection
of what are known in the industry as "marketing service organizations," which buy airline
tickets and hotel rooms in bulk for independent travel agents.
Malek and Ballou reportedly have a third travel industry business in the works, but won't
Because Global Vacation Group has filed an IPO with the Securities and Exchange
Commission, neither Malek nor Ballou would discuss details of that company.
But in an interview last week, Ballou said he and Malek, old friends, began discussing
business ideas after Alamo was sold a few months ago.
"I took my basic business idea to them and literally in the space of a week they had agreed
to back it with capital," he said. "We took another week to hammer out some terms."
"I felt like the dog that had finally caught a car," Ballou said.
With $50 million of Thayer's capital, Ballou began buying tour wholesalers, which create
tours by making deals with airlines, hotels, car rental firms and other services providers.
By May -- just nine months after going into business with Thayer -- Ballou had spent $108
million acquiring five tour companies, creating Global Vacation Group, which now is one
of the biggest operators of tours to Hawaii, the Caribbean and the United States with
annual revenue of $114 million last year.
Thayer put $50 million into Global Vacations and will own 60 percent of the company's
stock, worth about $155 million if the IPO is completed on schedule this summer.
Thayer's money was not the most important part in the equation. "The largest part of my
coming together with them and a big part of what makes the thing tick is personal
relationships," Ballou said. "They have the contacts . . . and in Fred's case, a guy who's
well-known in the travel industry, and that's helpful."
Lunch Leads to a Deal
The crucial mix of contacts, cash and quick decision-making also is behind Thayer's most
successful investment, the buyout of Software AG Systems of Reston from its parent
company in Germany.
Software AG President Daniel F. Gillis set out to buy his division because he knew the
German parent company had financial problems and needed cash.
Gillis met Thayer through classic networking. Developing contacts in the Virginia
technology community, Rickertsen went on the board of MLC Holdings Inc., a Reston
computer leasing firm. MLC's chief financial officer was a friend of the Software AG chief
The three men got together for lunch in the fall of 1996 at the Hyatt Reston Town Centre,
Rickertsen recalled. That led a few weeks later to a sit-down between Software AG and
Thayer executives and then a trip to Germany by Gillis and Rickertsen in January 1997.
"We were looking for a firm with a certain philosophy," Gillis said. "We had to select a
partner that understood the strategy, liked the management team and wanted to fund it."
Some of the firms Gillis talked to had their own ideas about how Software AG should be
run. "We told them, if you don't like the story, don't invest."
Thayer liked the story and the executives in Germany liked Thayer. Though Rickertsen
spearheaded the deal and became chairman of Software AG's board, it didn't hurt that
Stern once ran Braun AG in Germany and is fluent in both the language and business
practices of the country.
Software AG Germany agreed to sell the U.S. division for $85 million in cash plus a 24
percent royalty on sales of its software. Thayer put $29 million of its own cash into the
company, borrowed the rest and completed the buyout in April 1997.
Hoping to take advantage of the hot IPO market and cash out quickly, Thayer brought in
BancAmerica Robertson Stephens and Donaldson, Lufkin & Jenrette * to underwrite
a stock offering.
The timing turned out to be terrible. Software AG began its roadshow for investors last Oct.
27, the day the Dow Jones industrial average fell more than 500 points because of financial
turmoil in Asia.
Instead of $14 a share, for which Software AG had hoped to sell stock, the company had to
settle for $10 a share. That was enough, though, for Thayer's investors to recoup their
entire original investment -- and retain a 59 percent stake in the company.
After doubling its profit, Software AG went back to the market last month and sold its stock
for $24.25 a share. Thayer sold enough shares to pay $115 million to its investors and still
keep 10.8 million shares worth about $345 million at current prices.
"It's been a great deal for everyone," said Software AG President Gillis -- everyone including
Before the Thayer-backed buyout, he was an employee, albeit an employee earning almost
half a million dollars a year. He sold $4.8 million worth of stock in the May offering and still
owns or has options to buy more than 2 million shares. That's a $60 million nest egg that
Thayer would be more than happy to help him invest.
* For more on William Donaldson, the new head of the Securities & Exchange
Commission, GO TO > > > Spotting the SEC
The Lobbyists - Highly paid pimps to the powerful.
From Washington on $10 Million a Day - How Lobbyists Plunder the Nation:
PIMPS TO POWER
Lobbyists and the Destruction of Democracy
The link between campaign donations and political policy was brought into sharp focus by
the campaign finance scandals that erupted during the 1996 campaign. Even jade
observers were started by the Clinton administration’s selling of the Lincoln bedroom to the
highest bidder, and its organizing of White House coffee klatsches to reward donors and
encourage them to make additional contributions.
But political contributions are only one way that big business wins favors in Washington....
Understanding how the capital works, and how business prospers here, requires a trip
through the world of beltway lobbying and a review of the vast army of hired guns working at
the behest of Corporate America.
Dollar for dollar, lobbying is a better investment than campaign contributions— one
reason business spends far more on the former than on the latter.
In 1996, Philip Morris coughed up $19.6 million for lobbying programs vs. $4.2 million
for campaign donations (making it the leader in both categories). The same pattern holds
true with other firms.
For 1996, Georgia Pacific spent $8.9 million for lobbying and handed out $527,000 in
political money. Corresponding figures for AT&T are $8.4 million vs. $1.8 million; for
Phizer, $8.3 million vs. $775,000; for Boeing, $5.2 million vs. $770,000; for ARCO, $4.3
million vs. $1.4 million; for Lockheed, $3.5 million vs. $1.26 million; for FedEx, $3.1 million
vs. $1.9 million; for Dow Chemical $1.5 million vs. $578,000.
In addition to in-house efforts, most big corporations spend lavishly for outside lobbying
firms. Lockheed, for example, retains at least two dozen beltway lobby shops to
supplement its own efforts, while FedEx has an additional 10 firms on retainer.
In 1996, Boeing hired seven outside lobby shops for the sole purpose of pushing
renewed Most Favored Nation trade status for China, paying them a combined total of
at least $160,000 for their efforts.
While corporate lobbying has long been a major force in American politics, it has been
greatly transformed during the past few decades. Today, many efforts involve stealth
lobbying— the chief tactic here is mobilizing fake “grassroots” campaigns— or with
indirect methods, such as buying research from friendly “think tanks” in order to
influence Congress and public opinion.
All of this makes calculating corporate lobbying expenditures nearly impossible, though it’s
safe to say that lobbying has now become a multi-billion dollar-per-year industry....
When you consider the enormous benefits bestowed on Corporate America by the White
House and Congress, the big sums companies spend to win favors are revealed as chump
After winning control of Congress in 1994, the GOP house leadership met weekly with
“The Thursday Group,” a pack of lobbyists and activists who helped plot legislative and
media strategy on the “Contract With America”.
Included in this elite troupe were hired guns representing the U.S. Chamber of
Commerce, the National Federation of Independent Business, and Americans for
SEND LAWYERS, GUNS AND MONEY
In the Belly of the Beast
If the post-Cold War environment has left arms makers exposed, the industry still has
plenty of assets when it comes to getting its way in Washington. Chief among them is that
weapons makers, to an even greater extent than other industries, have especially tight links
to the government bureaucracy.
When the Pentagon in 1997 needed a team to prepare a report on “reshaping the U.S.
military for the 21st century,” it picked for the job a task force headed by Philip Odeen,
president of BDM, one of the country’s big defense companies, including Robert Riscassi,
a former Army general who now serves as a vice president at Lockheed.
The task force, known as the Quadrennial Defense Review, predictably concluded that
force levels should be cut further, but the Pentagon’s procurement budget should
be increased, thereby ensuring future profits for the arms industry.
The Pentagon’s Defense Policy Advisory Committee on Trade provides confidential
recommendations to the Secretary of Defense on the sale of weapons abroad. Members
have included CEOs from Lockheed, Boeing, Northrop Grumman and McDonnell, as
well as a number of former Pentagon officials who now serve as consultants to the arms
Needless to say, the Advisory Committee invariably favors elimination of any barrier to
foreign sales and the introduction of a host new public subsidies to arms companies.
Then there’s the Pentagon’s Defense Science Board, where Defense Department officials
and industry executives join hands to lard out vast sums of money to fund research on
Past members at the science board have included former Defense Secretary William
Perry; former CIA chief John Deutsch, and Paul Kaminski, the assistant secretary for
Worthy of more detail is the Defense Trade Advisory Group (DTAG), the panel set up by
the State Department to offer counsel in regard to the Direct Commercial Sales (DCS)
program, by which defense contractors make private sales to foreign military and police
In theory, State allows the sale of weapons destined for a “defensive” role. It will not vend
arms to an “aggressor” nation.
In practice, State authorizes sales to virtually any nation capable of paying for its purchases.
Of some 20,000 requests for licenses made by vendors in 1994, State rejected just 209.
During the Clinton years, State has sanctioned the sale of tank engines to Israel, trainer
aircraft to Taiwan, and Black Hawk helicopters to Mexico.
Also approved were deals with Guatemala, El Salvador, Colombia and Saudi Arabia.
None of this is surprising after examining the roster of DTAG, State’s advisor on these
deals. In 1995, 57 of the 60 panel members came from the arms industry. The group was
headed at the time by William Schneider, a veteran of the military-industrial complex who
served as undersecretary of state for security assistance during the Reagan/Bush years....
As late as 1991, the ten biggest defense companies had a total of 108 lobbyists registered
As of mid-1997, Lockheed Martin alone has 87 lobbyists registered with Congress, 26
working out of the company’s own offices and 61 at outside firms that the company had on
retainer. Lockheed’s total lobbying expenditures for 1996 totaled $3.8 million, 10 times
more than the combined lobbying expenditures for the ten biggest defense contractors in
While Boeing has fewer lobbyists on its payroll – 70 – it spent more than Lockheed,
shelling out $5.2 million for lobbying in 1996. Other arms makers have similarly huge
efforts, with Northrop employing 58 lobbyists and McDonnell Douglas 53....
The United States accounts for about half of all military spending on the planet ...
Here’s an example of just how ridiculous things have become:
A few years ago, it appeared that Congress might kill off a relic of the Cold War, the V-22
Osprey, a vertical lift-off plane whose prime contractors are Boeing and Bell Helicopter.
From the perspective of Pentagon porkers and arms makers, the V-22 has special appeal:
since it is incapable of carrying any of the military’s current inventory of fighting vehicles, it
has opened the door to a subsidiary boondoggle, the armored dune buggy. Said buggy,
which is capable of attaining speeds of 80 miles per hour, is being designed especially to fit
on the V-22.
To help save the plane, lobbyists for the V-22 dreamed up Alyssa, Albert & the Magic
Plane, a cartoon book that was distributed to members of Congress. The comic book
opens with little Alyssa playing in her backyard with Albert, a stuffed animal who springs to
life. The pair dream of attending the 1996 Olympics in Atlanta but grow despondent upon
concluding they won’t be able to get to the games by bicycle (too far), truck (no drivers
license), boat (no water near atlanta), the Space Shuttle (not practical), or a variety of other
Just as the cuddly duo have reached the point of despair a V-22 – the “Magic Plane” –
lands in the backyard to fly them to Atlanta....
The dramatic tale of Alyssa and other lobbying, combined with hefty campaign donations
from Boeing and Bell, led Congress to save the V-22.
Coming next: The arms makers sign up Barney the Dinosaur to lobby for Star Wars....
For more, GO TO > > > Birds in the Lobby; Mocking Democracy; Nests in the Pentagon;
The Secret Nests
The Media - You know, the source of your knowledge.
From Derailing Democracy: . . . It has been almost 40 years since President Eisenhower,
in his final address to the nation before leaving office in 1961, issued a rather extraordinary
warning to the American people that the country “must guard against unwarranted
influence, whether sought or unsought, by the military-industrial complex. The
potential for the disastrous rise of misplaced power exists and will persist.”
Following the same course that virtually every other major industry has in the last two
decades, a relentless series of mergers and corporate takeovers has consolidated control of
the media into the hands of a few corporate behemoths.
The result has been that an increasingly agenda has been sold to the American people by a
massive, multi-tentacled media machine that has become, for all intents and purposes, a
propaganda organ of the state....
And it is certainly true that by all outward appearances the United States does appear to
have the very epitome of a free press. . . . Yet behind this picture of plurality there are clear
warning signs that an increasingly incestuous relationship exists between the media titans
and the corporate military powers that Eisenhower so feared.
For example, the number-one purveyor of broadcast news in this country— NBC, with both
MSNBC and CNBC under its wing, as well as NBC news and a variety of “news
magazines”-- is now owned and controlled by General Electric, one of the nation’s largest
Is it not significant that as GE’s various media subsidiaries predictably lined up to
cheerlead the use of U.S. military force in Kosovo, it was at the same time posting
substantial profits from the sale of the high tech tools of modern warfare it so
For more, GO TO > > > Parrots in the News Room
The Money Men - The birds who invented the term “quid pro quo”.
From The Money Men, by Jeffrey H. Birnbaum: . . . If you assume that campaign money is
so distasteful that you don’t want to hear any more about it, you’re closing your mind to one
of the most fundamental and most fascinating stories in American politics. It’s okay to be
outraged— more than okay. But it’s wrong to be so disgusted that you don’t want to read
Take, for example, the real-life picture we should have of our elected officials. It’s wrong to
think of them sitting studiously through boring congressional hearings or making speeches
to Rotary Club luncheons.
Think of them, instead, in windowless offices grubbing for money almost every spare
moment they get. Fund-raising is so essential to their reelections yet takes so much time
that politicians have invented a virtual science of efficient solicitation.
Here’s the typical scene: The lawmaker or would-be lawmaker sits at a desk surrounded by
telephones. Aides seated nearby (there are usually 2 or 3 aides, but I’ve heard about
instances involving as many as 8) dial up contributors and stay on the line until the would-be fund giver comes on. Then they put that person on hold until the lawmaker gets to their
The politician is thus able to move seamlessly from one begging session to another, and
groveling can go on nonstop.
So there’s a picture for the ages: democracy on hold, literally.
Here’s another one: Around a conference table in the suite of the Speaker of the House ... a
dozen lobbyists and trade-association executives plot strategy with the highest-ranking
lawmakers in Congress. This isn’t an occasional meeting. It happens every week. On
Thursday. At 11 AM. It even has a title: the Thursday Group....
The point is that money men are players. They aren’t dark figures lurking in the
background, plotting political intrigue. They are central to the drama. They make a
difference in the way laws are made and implemented. Without them, the politicians
wouldn’t be politicians. And they insist on, and invariably get, politicians’ attention.
That’s the way it works....
~ ~ ~
Money, money everywhere.
But not all of it carries the same weight. And not all of it goes to candidates. The laws and
rules that govern political fund-raising are many and peculiar. They also are largely
At the federal level, the most that any person can donate to a candidate is $1,000 per
election. Political-action committees (PACs), which are amalgams of individuals, can give
$5,000. But that’s just the start. Individuals, labor unions, and corporations can give as
much as they want to political parties.
That’s the so-called soft money or, more appropriately, sewer money.
This money, in effect, is used to make a mockery of the limits on direct giving to candidates.
Think of it as legal cheating....
For more on sewer money, GO TO > > > A Simple Solution to Campaign Finance Reform
# # #
FOR MORE BOEOTIAN-CONNECTED NESTS, FLY TO...
A CONNECTICUT YANKEE IN KING KAMEHAMEHA’S COURT
ALOHA, HARKEN ENERGY!
A SIMPLE SOLUTION TO CAMPAIGN FINANCE REFORM
BIRDS IN THE LOBBY
THE CARLYLE GROUP: BIRDS THAT DRINK FROM CESSPOOLS
CLAIMS BY HARMON
CROUCHING DRAGONS ~ HIDDEN RATS
DIRTY GOLD IN GOLDMAN SACHS
DIRTY MONEY, DIRTY POLITICS & BISHOP ESTATE
DROWNING IN THINK TANKS
GOING POSTAL AT CONSIGNIA
NASA AND THE WAR ON TRUTH
NESTS IN THE PENTAGON
PREDATORS IN PARADISE
SPOTTING THE SEC
TARNISHED WINGS: THE GREED AT LOCKHEED
THE EAGLE AWAKES
THE KISSINGER OF DEATH
THE NUCLEAR NESTS
THE NESTS OF OSAMA BIN LADEN
THE SECRET NESTS
THE SINKING OF THE EHIME MARU
VULTURES OF THE SANDWICH ISLES
YAKUZA DOODLE DANDIES
YEAR OF THE DRAGON
~ o ~
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Originally posted February 8, 2003
Last update October 27, 2009