Pentagon Puts Hold on Boeing Tanker Deal

Yahoo News ^ | 12/2/03 | Andrea Shalal-Esa - Reuters

[NormsRevenge]

WASHINGTON (Reuters) - The Pentagon (news - web sites) postponed action on $18 billion contracts for 100 Boeing Co. (NYSE:BA - news) 767 tankers until the deal is investigated following Boeing's firing of two officials for ethical violations, Defense Department officials said on Tuesday.

Deputy Defense Secretary Paul Wolfowitz told leaders of the Senate Armed Service Committee in a letter dated Dec. 1 that he was ordering a "pause in the execution" of the Air Force contracts to lease and buy the mid-air refueling tankers, a major setback in Boeing's two-year effort to sell the planes.

Wolfowitz said his decision was prompted by Boeing's firing last week of Chief Financial Officer Michael Sears for discussing a possible job with former Air Force official Darleen Druyun -- the lead player on the lease deal -- before she recused herself from overseeing Boeing business.

Boeing subsequently hired Druyun in January and fired her last month. On Monday, it announced the resignation of Chairman and Chief Executive Officer Phil Condit.

Wolfowitz said he asked Pentagon Inspector General Joseph Schmitz -- who first launched a criminal investigation of the deal last September -- to assess any negative impact the allegations might have had on the contract negotiations.

"In light of the recent allegations and actions taken with the Boeing Co. to remove Michael Sears and Darleen Druyun, I am ordering a pause in the execution of the contracts to lease and purchase tanker aircraft," Wolfowitz wrote in the letter and ordered the investigation to continue.

After the investigation was completed, Wolfowitz said, the Pentagon would "consider" whether to proceed with the Air Force's plan to lease the first 20 of the planes. He said the Pentagon would also comply with federal rules requiring a 30-day notification of Congress of any multiyear purchases.

The Pentagon investigation initially focused on whether Druyun improperly shared with Chicago-based Boeing proprietary information provided to the Air Force by rival tanker builder Airbus, a unit of European aerospace company EADS (EAD.PA).

The inspector general's office did review the lease deal in August, concluding the Air Force could wind up paying more to lease 100 Boeing tankers if interest rates rise more than projected, or if Boeing ran into financial trouble.

It stopped short of condemning the overall deal, but said the government was assuming "greater financial risk with the lease" than a direct purchase and that the Air Force could have better handled the deal, then valued at $22.4 billion.

After months of wrangling, the Senate Armed Services Committee (news - web sites) refused to approve the original plan to lease 100 planes, devising a compromise that called for the lease of 20 tankers and the purchase of up to 80 more in coming years.

Keith Ashdown, of Taxpayers for Common Sense, a nonprofit group, welcomed the delay. "It is the only prudent step that they could take at this point," Ashdown said. "There is an ethical cloud of controversy above Boeing, the Air Force and the whole tanker recapitalization plan."

[NormsRevenge]

Tue Dec 2, 1:46 PM ET

The Pentagon (news - web sites) has told Congress it will postpone any action on $18 billion in contracts for 100 Boeing 767 tankers until the deal is investigated following Boeing's firing of two officials for ethical violations, Defense Department officials said on December 2, 2003. Deputy Defense Secretary Paul Wolfowitz told leaders of the Senate Armed Service Committee in a letter dated Dec. 1 that he was ordering a 'pause in the execution' of the Air Force contracts to lease and buy the mid-air refueling tankers. An artist's rendition shows a 767 Tanker/Transport. (Boeing/Reuters)

[danneskjold]

Tom Daschle - Deeply Saddened...

[Enterprise]

"Tom Daschle - Deeply Saddened..."

He must have tears running from his eyes about now. But go ahead little Tommy, keep obstructing Bush on his judicial appointments ya punk! Go ahead! Keep making him mad! LOL!

[dts32041]

Yeah no more walking around money from his wife.

[bushbiker]

As a Boeing supplier all I can say is... well I can't say it here. If these guys get it
stuck in their zipper one more time their going to need an addadicktomy.

That said I can't imagine our government even considering ordering these planes
from a foreign company, Airbus. The loss of this order would devastate an already
faltering company. Although I believe in the survival of the fittest, we are not talking
about K-cars versus Accords here, this effects national security.

I don't know the answer for these guys, something needs to happen soon. I don't
believe they would weather the loss of this contract very well, and the ripple effect
would be devastating.

[anymouse]

Rush was just asking why the media isn't talking about Linda Daschle's lobbying being central in this scandal.

You can bet that little Tommy is going to be deeply saddened when a call for investigating his wife's role in this scandal gains traction. Now that Rush shines a spotlight on her involvement maybe it will.

[Tunehead54]

"Deeply Saddened" Daschole Bump

---

;-)

[NormsRevenge]

I hope that the Dasscholes don't have to move out of their 2 million dollar house becuz of this. ;-)

[Liz]

I hope that the Dasscholes don't have to move out of their 2 million dollar house becuz of this.

I hope Linda Lobbyist won't have to don her Miss SD tiara and sash to go get new clients.

[BOBTHENAILER]

hope Linda Lobbyist won't have to don her Miss SD tiara and sash to go get new clients.

Sugar daddy tommy will help her out with some juicy inside info on the next big deal she could glom onto.

[Big Horn]

That will put the pucker to him.

[Mr. Silverback]

Agreed. There has to be a way to get some of these planes. The tanker fleet is way to bloody old, and it was already too bloddy old when I was cre chiefing in the early 90s. Just by some of the freakin planes and have the perp walks later!

[6AL-4V]

This deal should not go through. The 767 was not designed as a tanker or a freighter. Sure it can be converted, but there are better platforms. MD-11's, currently out of production, but a possibility. These are much better suited for heavy lift and a logical replacement for current KC-10's

[okie01]

Shall we start a pool on the date that Little Tommy announces he will not stand for re-election in '04, so that he and darling Linda can spend their golden years together?

Preferably behind a stockade fence...

[taildragger]

4V,

Better Airframes? How about the new 7E7 to get a lower operating cost unit for the Air Force?

Better yet a Tanker Version of the C-17.

The logistics would be a big cost saver since all the spare parts other than the fueling system are in the inventory and the airframe is a proven design.