Pentagon Halts Lease Deal After Firing of Boeing CEO

(Washington, D.C.)  In response to the sudden resignation of Phil Condit and the hiring of Harry Stonecipher as CEO of Boeing, the Council for Citizens Against Government Waste (CCAGW) warned against forgiving-and-forgetting the embattled defense contractor.  Despite today’s announcement that the Pentagon will postpone the $18 billion plan to lease and buy 100 Boeing re-fueling tankers, Stonecipher has named the tanker deal one of his highest priorities and the plan still has defenders in Congress.   

“The tanker lease deal is expensive, unnecessary, budget-busting, scandalous, and the worst example of corporate welfare in recent memory,” CCAGW President Tom Schatz said.  “It violates federal law and sets an ominous precedent for similar deals in the future.  With a projected $500 billion deficit and our troops facing danger around the world, the Pentagon senior staff is the last resort to end this outrageous waste of tax dollars.”

Deputy Defense Secretary Paul Wolfowitz said the postponement was prompted by Boeing’s firing of Chief Financial Officer Michael Sears after he discussed the lease deal with Air Force official Darleen Druyun, the lead player on the lease deal.  The original plan called for leasing all 100 767 re-fueling tankers, but investigations by the Congressional Budget Office and the General Accounting Office (GAO) revealed that the lease plan could cost as much as $5.5 billion more than buying the planes outright.  The cost to upgrade, modernize, and repair planes the Air Force already owns would be approximately $3.2 billion, a difference of $13.9 billion.  A compromise version, which calls for leasing just 20 of the tankers and purchasing up to 80 more in the years ahead, was included in the 2004 defense spending bill signed into law by President Bush.  But Senators John McCain (R-Ariz.) and Peter Fitzgerald (R-Ill.) warned the Pentagon to proceed carefully.

“The best of all scenarios would be to scrap the entire proposal,” Schatz continued.  “If the Air Force truly deems these planes as necessary to its mission, it should procure them competitively, fairly, and openly like any other major weapon system and reduce spending elsewhere in its budget in order to accommodate its priorities.  But the Pentagon, by heeding the advice of the Senate and stopping the deal to allow further investigation, provides some reassurance to taxpayers.”

The reshuffling of CEOs is the latest fallout from widespread allegations of ethical violations at Boeing.  In the last year alone, the Pentagon punished Boeing for stealing trade secrets from rival Lockheed Martin by banning Boeing from bidding on satellite-launching contracts, costing the company $1 billion.   The GAO found that Boeing had obtained and misused proprietary information from rival Raytheon as they competed for a missile-defense contract.

“It is amazing the Boeing won the tanker contract despite the ongoing investigation,” Schatz concluded.  “When CAGW decided to name Boeing its Corporate Turkey of the Year, it was not a close contest.”

The Council for Citizens Against Government Waste is the lobbying arm of Citizens Against Government Waste, the nation's largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.