Own the Sky

Comments () | Published November 1, 2010

Killing the Deal
In September 2002, Ralph Crosby, a veteran military contracting executive, became the CEO of EADS’s North American division. On hearing the news, Roche sent a menacing-sounding e-mail to his press officer: “Well, well. We will have fun with Airbus.”

Roche and Crosby had been rivals since their days at Northrop Grumman, where Crosby had run its aerospace division. His new employer, EADS, saw Boeing as a monopolistic force in the US aircraft market. The European company had dreams of North American expansion.

Eight months after Crosby came aboard, Michael Wynne, a senior Pentagon official, told Roche that he planned to meet Crosby for lunch and ask what an EADS tanker would cost. Roche was flabbergasted.

“Mike, you must be out of your mind!” Roche wrote in an e-mail. “Crosby has lots of baggage, as does Airbus. We won’t be happy about your doing this.”

Wynne was concerned about rules against so-called “sole-source contracting.” Roche was more worried about the politics of meeting with a European company. The United States had just invaded Iraq, and the French government’s lack of support had propelled members of Congress into a jingoistic furor. In Capitol cafeterias, French fries were replaced on the menu with “freedom fries.” EADS’s biggest aircraft-assembly plant, where it would likely build a tanker, was in Toulouse.

“Hello?” Roche wrote, implying a deafness on Wynne’s part. “Within minutes of the invite, Crosby most likely used your call to butter his personal croissant in Paris [with officials in the President’s office]. Be careful!”

What emerges from Roche’s colorful e-mails is a different portrait than that of the courageous public servant out to “protect the kids.” He looks more like a grudge-holding executive with an ax to grind. In one e-mail exchange with Druyun, who had just “read with disgust” an article on EADS and Crosby, Roche wrote, “I had hoped you would have stayed and tortured him slowly over the next few years until EADS got rid of him!”

McCain eventually got hold of these and many other e-mails, including those from Boeing employees, zeroing in on Roche as the official most responsible for the ill-advised tanker deal. “Secretary Roche’s e-mails,” McCain said in a Senate speech, “suggest that he is indeed a man who allows his personal animus to stifle competition.”

Roche says he worried that Crosby would try to convince Wynne that EADS was ready to compete when it really wasn’t, because it didn’t have its own boom. Nearly a year and a half had passed since Stevens’s “virgin birth” maneuver. Roche thought time was running out to complete the lease deal.

But while Roche was pushing against the system, Druyun was breaking the law. On October 17, 2002, while negotiating the price of the tanker lease, she met with Boeing’s chief financial officer and discussed taking a senior executive job at the company—a textbook violation of conflict-of-interest laws.

After the meeting, the Boeing executive, Michael Sears, wrote an e-mail to the company’s office of the chairman: “Had a ‘nonmeeting’ yesterday. Good reception to job, location, salary.” The job was a position in Boeing’s missile-systems unit; the salary was $250,000. Druyun went to Boeing in January 2003. The Project on Government Oversight, a watchdog group, called it “one of the most egregious examples in recent memory of the revolving door between the federal government and defense contractors.”

The “nonmeeting” wouldn’t be uncovered for several months, but as it turned out, that one 30-minute conversation killed the lease deal.

“We Can’t Fight This”
Air Force officials continued to plead their case. In 2003, a group of officers loaded pieces of a corroded tanker wing into the trunk of a car and drove it up to Capitol Hill to show lawmakers. But the tide was turning against the lease. In September, the Government Accountability Office, Congress’s auditing arm, found that the total cost could be $6 billion more than the service had said and that the terms might violate federal law.

Still, the lease proponents in Congress moved to slide money for the tankers into a high-priority $87-billion spending bill to pay for the war in Iraq and Afghanistan.

And then the bottom fell out.

Not long after Druyun went to work at Boeing, the company began looking into the backgrounds of former government employees it had hired. In the course of the investigation, Boeing discovered e-mails detailing the meeting between Druyun and Sears. The company fired them on November 24. A week later, CEO Phil Condit resigned.

Five months later, Druyun pleaded guilty to conspiracy and admitted she had increased the price the Air Force would pay for the tankers as a “parting gift to Boeing.” She also admitted to favoring Boeing in other negotiations in consideration of future employment for her daughter and son-in-law. Druyun received a nine-month sentence in federal prison. Sears, who pleaded guilty later, got four months.

As soon as the news about Druyun and Sears broke, members of Congress who had previously supported the lease began to back away. Along the way, some lawmakers who were undecided “smelled smoke” on the deal, says one former Hill staffer, but now they saw the fire and ran for cover.

Roche picked up the phone and called Secretary of Defense Donald Rumsfeld. “It’s over,” Roche said. “We can’t fight this.”

In May 2004, Rumsfeld officially “deferred” a decision on the tanker deal, in part based on recommendations from the Defense Science Board, a group of outside advisers who concluded that the corrosion problem in the tankers could be managed and that it might not be as expensive as some had thought to maintain the existing fleet.

Four months later, the Air Force grounded 29 more tankers. The pylons that hold the engines to the wings had corroded and needed significant repairs. Tanker crews had a temporary fix to bond metal to the pylon, but it would last only five years and cost $400,000 per plane.

Congress officially killed the lease in October 2004. Roche resigned three months later. Shortly after he left, the Pentagon inspector general cited Roche for two violations of military ethics rules, stemming from another ill-advised e-mail. In that message, Roche implied that he would help get a job for the brother of a White House budget official and friend if she would intercede on behalf of the tanker deal. “Give tankers now,” Roche wrote after forwarding her brother’s résumé to a contact at Northrop Grumman, Roche’s old employer. “(Oops. Did I say that?)”

In the first round of the tanker war, McCain had vanquished Roche. But in the senior reaches of the Air Force, some wondered if McCain’s real motivation had been to embarrass the service itself. Officials took note of his Navy pedigree—McCain was a pilot, and his father and grandfather were famous admirals—and speculated that McCain was taking sides in a military rivalry. “McCain is not a big fan of the Air Force,” says Whitten Peters, the former Secretary. “In fact, he hates the Air Force.”