[News] Lockheed and Loaded: How the Maker of Junk Fighters Came to Have Full-Spectrum Dominance Over the Defense Industry
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Thu Oct 18 11:34:23 EDT 2018
https://www.counterpunch.org/2018/10/18/lockheed-and-loaded-how-the-maker-of-junk-fighters-like-the-f-22-and-f-35-came-to-have-full-spectrum-dominance-over-the-defense-industry/
Lockheed and Loaded: How the Maker of Junk Fighters Like the F-22 and
F-35 Came to Have Full-Spectrum Dominance Over the Defense Industry
by Jeffrey St. Clair
<https://www.counterpunch.org/author/jeffrey-st-clair/> - October 18, 2018
------------------------------------------------------------------------
Lockheed-Martin is headquartered in the Bethesda, Maryland. No, the
defense titan doesn’t have a bomb-making factory in this toney Beltway
suburb. But as the nation’s top weapons contractor, it migrated to DC
from southern California because that’s where the money is. And Lockheed
rakes it in from the federal treasury at the rate of $65 million every
single day of the year.
From nuclear missiles to fighter planes, software code to spy
satellites, the Patriot missile to Star Wars, Lockheed has come to
dominate the weapons market in a way that the Standard Oil Company used
to hold sway over the nation’s petroleum supplies. And it all happened
with the help of the federal government, which steered lucrative no bid
contracts Lockheed’s way, enacted tax breaks that encouraged Lockheed’s
merger and acquisition frenzy in the 1980s and 1990s and turned a blind
eye to the company’s criminal rap sheet, ripe with indiscretions ranging
from bribery to contract fraud.
Now Lockheed stands almost alone. It not only serves as an agent of US
foreign policy, from the Pentagon to the CIA; it also helps shape it.
“We are deployed entirely in developing daunting technology,” Lockheed’s
new CEO Robert J. Stevens told the New York Times report Tim Weiner.
“That requires thinking through the policy dimensions of national
security as well as technological dimensions.”
Like many defense industry executives, Stevens is a former military man
who cashed in his Pentagon career for a lucrative position in the
private sector. The stern-jawed Stevens served in the Marines and later
taught at the Pentagon’s Defense Systems Management College, an
institution which offers graduate level seminars in how to design
billion dollar weapons deals. From the Marines, Stevens landed first at
Loral, the defense satellite company. Then in 1993 he went to work at
Lockheed, heading its “Corporate Strategic Development Program”. There
Stevens wrote the gameplan for how Lockheed would soar past Boeing,
General Dynamics, Northrop Grumman and the others, as the top recipient
of Pentagon largesse.
The plan was as simple as it proved profitable. Instead of risking the
competition of the marketplace, Lockheed, under Stevens’ scheme, would
target the easy money: federal contracts. The strategy was also
straightforward: flood the congress with PAC money to get and keep
grateful and obedient members in power. Those friendly members of
congress would also be surrounded by squads of lobbyists to develop and
write legislation and insert Lockheed-friendly line items into the
bloated appropriations bills that fund the government. It also called
for seeding the Pentagon and the White House with Lockheed loyalists,
many of whom formerly worked for the company.
“We need to be politically aware and astute,” said Stevens. “We need to
work with the congress. We need to work with the executive branch. We
need to say: we think this is feasible, we think this is possible. We
think we have invented a new approach.”
The scheme succeeded brilliantly. By the end of the 1990s, Lockheed had
made the transition from an airplane manufacturer with defense contracts
to a kind of privatized supplier for nearly every Pentagon weapons
scheme, from the F-22 fighter to the Pentagon’s internet system. Then
9/11 happened and the federal floodgates for spending on national
security, airline safety and war making opened wide and haven’t closed.
Lockheed has been the prime beneficiary of this gusher of federal money.
Since September 2001, the Pentagon’s weapons procurement program has
soared by more than $20 billion, from $60 billion to $81 billion in
2004. Lockheed’s revenues over the same time period jumped by a similar
30 percent. And, despite the recession and slumping Dow, the company’s
stock tripled in value.
Almost all of this profiteering came courtesy of the federal treasury.
More than 80 percent of Lockheed’s revenues derives directly from
federal government contracts. And most of the rest comes from foreign
military sales to Israel, Saudi Arabia, South Korea and Chile. Israel
alone spends $1.8 billion a year on planes and missile systems purchased
from Lockheed. Lockheed sells its weaponry, from F-16 fighters to
surveillance software, to more than 40 nations. “We’re looking at world
domination of the market,” gloated Bob Elrod, a senior executive in
Lockheed’s fighter plane division.
And there’s little risk involved. Nearly all of these sales are
guaranteed by the US government.
After 9/11, Bush tapped Lockheed’s Stevens to lead his presidential
commission on the Future of the US Aerospace Industry, a body which, not
surprisingly, wasted little time pounding home the importance of
sluicing even more federal dollars in the form of defense and air
traffic control contracts to companies such as Lockheed.
But Stevens’ position was just the icing on a very sweet cake. Former
Lockheed executives and lobbyists toil every day on behalf of the
defense giant from the inside the administration and the Pentagon. At
the very top of the list is Steven J. Hadley, who replaced Condoleezza
Rice as Bush’s National Security Advisor. Prior to joining the Bush
administration, Hadley represented Lockheed at the giant DC law firm of
Shea and Gardner. Other Lockheed executives have been appointed to the
Defense Policy Board and the Homeland Security Advisory Council. Bush’s
Transportation Secretary, Norman Mineta, and Otto Reich, the former
deputy Secretary of State for the Western Hemisphere, both once worked
as Lockheed lobbyists.
But the revolving door swings both ways for Lockheed. On its corporate
board reposes E.C. Aldridge, Jr. Before retiring from the Defense
Department, Aldridge served as the head of the Pentagon’s weapon
procurement program and signed the contracts with Lockheed to build the
F-22, the world’s most expensive airplane.
When insiders don’t get you everything you need, there’s always
political bribery. In the US, politicians who serve Lockheed’s interests
get annual dispensations of cooperate swill courtesy of the company’s
mammoth political action committee. Each year Lockheed’s corporate PAC
doles out more than $1 million, mainly to members of the crucial defense
and appropriations committees.
Overseas, the Lockheed has often resorted to a direct bribe of
government officials. In the 1970s, Lockheed famously handed out $12.5
million in bribes to Japanese officials (and organized crime figures) to
secure the sale of 21 Tristar aircraft to Nippon Airlines. The ensuing
scandal brought down Japanese Prime Minister Kakuei Tanaka, who was
convicted of being on the receiving end of Lockheed’s payola. Even
though the imbroglio lead the enactment of the Foreign Corrupt Practices
Act in 1977 which set stiff penalties for bribery, Carl Kochian,
Lockheed’s CEO at the time, defended the practice of handing out covert
cash inducements as a cost-effective way of securing billions in
contracts for the company. Bribery was just a cost of doing big business.
And indeed the Corrupt Practices Act didn’t deter Lockheed from handing
out financial incentives to foreign officials to speed things along. In
the 1990s, Lockheed admitted to stuffing the pockets of an Egyptian
official with $1.2 million dollars in order to grease the sale of three
Lockheed-made C-130 transport planes to the Egyptian military.
The clunky old C-130 Hercules continues to bring millions to Lockheed,
which sells the cargo plane to Jordan, Egypt and Israel. But the biggest
profits continue to derive from sales to the Pentagon, even though the
latest model of the transport has been plagued with operational problems
and cost overruns. Of course, in the funhouse economics of defense
contracts “cost over-runs” simply mean more millions in taxpayer money
going into the accounts of the very defense contractors that performed
the untimely or shoddy work in the first place.
Since 1999, the Air Force has purchased 50 of the new C-130J prop planes
from Lockheed. But none of these planes have performed well enough to
allow the Air Force to put them into service. An audit of the C-130
contract by the Inspector General of the Air Force revealed a host of
problems with the new plane that had been gilded over by Lockheed and
Pentagon weapons buyers.
One of the biggest problems with the plane is an ineptly designed
propeller system that keeps the C-130 from being flown in bad weather.
The C-130J is powered by six-propellers covered in composite material
that becomes pitted or even dissolves under sleet, hail or even heavy
rain. Ironically, many of the first batch of planes were delivered to an
Air Force reserve unit in Biloxi, Mississippi, where they were supposed
to function as “Hurricane Hunters,” plying through thunderstorms and
heavy winds in search of the eye of the storm. The planes proved useless
for the task. As a result, most of the C-130Js have been used only for
pilot training.
“The government fielded C-130J aircraft that cannot perform their
intended mission, which forces the users to incur additional operations
and maintenance costs to operate and maintain older C-130
mission-capable aircraft because the C-130J aircraft can be used only
for training,” the IG audit concluded.
Nevertheless, the Air Force paid Lockheed 99 percent of the contract
price for the useless planes.
“This is yet another sad chapter in the history of bad Pentagon weapons
systems acquisitions,” said Eric Miller, a senior Defense Investigator
at the Project on Government Oversight. “For years, the Air Force has
known it was paying too much for an aircraft that doesn’t do what it’s
supposed to. Yet it has turned a blind eye. The aircrews who have to fly
these aircraft should be very angry. They’ve been betrayed by the very
government that should be ensuring that the weapons they receive are
safe and effective.”
The profits from the C-130 are a mere pittance compared to what Lockheed
stands to make from its contracts to produce the two costliest airplanes
ever envisioned: the Joint Strike Fighter and the F-22 Raptor.
The Joint Strike Fighter, also known as the F-35, is slated to replace
the venerable F-16. Even though the initial designs for the F-35 proved
faulty (there continue to be intractable problems with the weight of the
plane), the Pentagon, under prodding from influential members of
Congress, awarded the Lockheed a $200 billion contract to build nearly
2,000 of the still unairworthy planes. Lockheed plans to sell another
2,500 planes at a sticker price of $38 million apiece to other nations,
starting with Great Britain. Once again, most of these sales will be
underwritten by US government loans.
The F-35 contract was awarded on October 16, 2001. Already, costs have
soared by $45 billion over the initial estimate with no end in sight.
But the F-22 Raptor stands in a class of its own. With a unit price of
more than $300 million per plane, the Raptor is the most expensive
fighter jet ever designed. One congressional staffer dubbed it,
“Tiffany’s on wings.” Conceived in the 1980s to penetrate deep into the
airspace of the Soviet Union, the F-22 has no function these days,
except to keep a slate of defense contractors in business, from
Lockheed, which runs the project, to Boeing which designed the wings to
Pratt-Whitney which designed the huge jet engines.
The F-22 was supposed to be operational a decade ago. But the latest
incarnation of the plane continues to suffer severe problems in fight
testing. Its onboard computer system is mired with glitches and its
Stealth features haven’t prevented the plane from popping up “like a fat
strawberry” on radar. Even worse, several test pilots have gotten dizzy
to the point of nearly passing out while trying to put the fighter
through evasive maneuvers at high altitudes.
Even so, the doomed project moves forward, consuming millions every
week, and no one with the power to do so seems to show the slightest
inclination to pull the plug.
* * *
By one account, Lockheed garners $228 in federal tax money from every
household in the US each year. But when it comes time to paying taxes
Lockheed pleads poverty. By taking advantage of a bevy designer
loopholes, Lockheed’s legion of accountants has reduced the
corporation’s annual tax liability to a mere 7 percent of its net
income. By comparison, the average federal tax rate for individuals in
the US is around 25 percent.
Of course, these kinds of special dispensations don’t come cheaply.
Lockheed spends more money lobbying congress than any other defense
contractor. In 2004, a banner year for the company, it spent nearly $10
million on more than 100 lobbyists to prowl the halls of congress,
keeping tabs on appropriations bills, oversight hearings and tax
committees. Over the past five years, only Philip Morris and GE spent
more money lobbying congress.
With Lockheed, it’s sometimes difficult to discern whether it’s taking
advantage of US foreign policy or shaping it. Take the Iraq war.
Lockheed’s former vice-president, Bruce Jackson, headed an ad hoc group
called the Committee for the Liberation of Iraq. This coven of corporate
executives, think tank gurus and retired generals includes such
war-mongering luminaries as Richard Perle, Jeane Kirkpatrick, Gen. Wayne
Downing and former CIA director James Woolsey. The Washington Post
reported that group’s goal was to “promote regional peace, political
freedom and international security through replacement of the Saddam
Hussein regime with a democratic government that respects the rights of
the Iraqi people and ceases to threaten the community of nations.”
This supposedly independent body seems to have gotten its marching
orders from inside the Bush White House. Jackson and others met
repeatedly with Karl Rove and Steven Hadley, Condoleezza’s Rice’s number
two at the National Security Council and a former Lockheed lobbyist. The
group eventually got a face-to-face meeting with the dark lord himself,
Dick Cheney. After meeting with White House functionaries, members of
the Committee would fan out on cable news shows and talk radio to
inflame the fever for war against Saddam.
Jackson has long enjoyed close ties to the Bush inner circle. In 2000,
he chaired the Republican Party’s platform committee on National
Security and Foreign Policy and served as a top advisor to the Bush
campaign. Naturally, the platform statement ended up reading like
catalogue of Lockheed weapons systems. At the top of the list, the RNC
platform pledged to revive and make operational the $80 billion Missile
Defense program supervised by Lockheed.
In 2002, the Bush administration called on Jackson to help drum up
support in Eastern Europe for the war on Iraq. When Poland and Hungary
came on board, Jackson actually drafted their letter supporting an
invasion of Iraq. His company was swiftly rewarded for his efforts. In
2003, Poland purchased 50 of Lockheed’s F-16 fighters for $3.5 billion.
The sale was underwritten by a $3.8 billion loan from the Bush
administration.
Lockheed also made out quite nicely from the Iraq war itself. It’s F-117
Stealth fighters inaugurated the start of the war with the “Shock and
Awe” bombing of Baghdad. Later, the Pentagon stepped up orders of
Lockheed’s PAC 3 Patriot missile. The missile batteries, designed for
use against SCUD missiles that Iraq no longer possessed, sell for $91
million per unit.
After the toppling of Saddam, Lockheed executives saw an opportunity to
gobble up one of the big private contractors doing business in Iraq,
Titan Corporation. The San Diego-based company was awarded a $10 million
contract to provide translators for the Pentagon in Iraq. Two of those
translators, Adel Nakhl and John Israel, were later accused of being
involved in the torture of Iraqi prisoners at Abu Ghraib prison. Titan
translators, who are paid upwards of $107,000 a year, were also
implicated in a scandal at Guantanamo prison.
Like Lockheed, after 9/11 Titan jettisoned almost all of its commercial
operations and began to focus entirely on government work. By 2003, 99
percent of its $1.8 billion in corporate income came courtesy of
government contracts. The firm also went on a buying spree of other
smaller defense contractors. Since 2001, Titan gobbled up ten other
defense-related companies. The most lucrative acquisition proved to be
BMG, Inc., a Reston, Virginia based company that specializes in
information collection and analysis for the Pentagon and the CIA. BMG
alone held Pentagon contracts worth $650 million.
The abuse scandals didn’t deter Lockheed from pursuing Titan. Indeed,
Christopher Kubasik, Lockheed’s chief financial officer, told the Los
Angeles Times that the torture allegations “were not significant to our
strategic decision.”
The merger was later delayed for other reasons by the Justice
Department, which was looking into allegations that Titan executives and
subsidiaries paid bribes to government officials in Africa, Asia and
Europe in order to win contracts–a method of doing business that
Lockheed executives must have admired.
Titan, which was formed amid the Reagan defense build up of the early
1980s, saw itself as a new kind of defense contractor, a weapons company
that didn’t make weapons. Instead of building missiles or planes, Titan
concentrated on developing software and communication packages for
Pentagon programs. Its first big contract was for the development of a
communications package for the guidance system of the Minuteman missile.
Since then Titan has become a major player in the lucrative information
technology market.
In recent years, Lockheed has begun to aggressively pursue the same
types of “soft defense” programs. In the past decade, Lockheed’s
Information Technology sales have increased by more than four hundred
percent. The bonanza began during the Clinton administration, when Al
Gore’s “reinventing government” scheme auctioned off most of the
data-management tasks of the federal government to the private sector.
Now nearly 90 percent of the federal government’s Information Technology
has been privatized, most of it to Lockheed, which is not only the
nation’s top arms contractor but also its top data-management supplier.
This opened vast new terrains of the government to conquest by Lockheed.
It now enjoys contracts with the Department of Health and Human
Services, Department of Energy and EPA. Lockheed also just corralled a
$550 million contract to take over the Social Security Administration’s
database. The privatization of Social Security has already begun.
But even in the IT sector, the big bucks are to be made in the
burgeoning surveillance and Homeland Security business. Lockheed now
runs the FBI’s archaic computer system, which took some much deserved
heat for letting the 9/11 hijackers slip through its net without
detection. It also won the $90 million contract to manage the top secret
computer network for the Department of Homeland Security, a system that
is supposed to function as a kind of “deep web”, linking the systems of
the FBI, CIA and Pentagon.
All of this is a precursor to even bigger plans hatched by Lockheed and
its pals in the Pentagon to develop an all-encompassing spying system
called the Global Information Grid, an internet system that is meant to
feed real time tracking information on terrorists suspects directly into
automated weapons systems, manufactured, naturally, by Lockheed.
“We want to know what’s going on anytime, any place on the planet,”
pronounced Lorraine Martin, Lockheed’s vice-president for Command,
Control and Communications Systems. And eliminate them, naturally.
On the battlefield of defense contractors, Lockheed has now achieved
full-spectrum dominance.
/This is adapted from a chapter in Grand Theft Pentagon
<https://www.amazon.com/exec/obidos/ASIN/1567513360/counterpunchmaga>./
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