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Lockheed (2) - bribery scandal

March 1976

WILL LOCKHEED BRIBERY SCANDAL TAINTS NASA AND OTHER SPACE AGENCIES ?

President of Lockheed Carl Kotchian has been sacked from the company this week. He was a key figure in what became one of the biggest bribery scandals ever. His testimony before a Senate committee last year contributed to sweeping reforms and passage of U.S. laws against Americans and U.S. firms paying off foreign government officials.

His admission had dramatic political reverberations overseas. So far it has led to the downfall of Japan's ruling government, discredited the Dutch monarchy and set off official inquiries in Colombia, Turkey, Italy, West Germany and Saudi Arabia.

The Senate probe eventually revealed that payoffs, bribes and kickbacks had been part of doing business overseas for American companies for decades. Although Lockheed and Kotchian received the brunt of the attention, more than 400 U.S. companies eventually admitted to paying foreign officials more than $700 million, or more than $2.5 billion in today's money.

After his dismissal Kotchian said Lockheed was a scapegoat and that the payoffs -- common throughout the 1960s and early 1970s -- were part of the way the "game" was played overseas. He maintained that no payoffs were made to American officials and no American laws were violated.

"If we were back in those times, I'd do it again," Kotchian said in an interview yesterday. "In present times, with the change in attitude and standards that are being applied now, I don't think that I would."

The scandal overshadowed a notable aviation career that spanned 35 years and paralleled Lockheed's rise to become one of the biggest aerospace companies in the world. Kotchian was named president of the firm in 1967 and until last week -- when forced to resign amid the bribery scandal -- helped oversee development of several notable aircraft, including the C-5 Galaxy military transport, the SR-71 Blackbird spy plane and the L-1011 TriStar passenger jet.

But it would be the L-1011 that would spell the end of Kotchian's aerospace career. It also almost killed the company, financially and politically.

After two prosperous decades from 1965 Lockheed new projects all failed to bring money to the company.

The SR-71 broad family total a maximum of 50 aircrafts, not much considering the sheer cost and complexity of the aircraft.

The AH-56 Cheyenne compound helicopter has been another failure - the Army cancelled the program in 1972.

The C-5A Galaxy giant transport plane has been a disaster - with a $2 billion overrun, cracks in the wings and a collapsing undercarriage, among other teething issues. The Air force cut orders to 80 aircrafts.

Lockheed bread and butter has been the F-104 Starfighter but that aircraft is now obsolete, and was tarred by an horrific accident rate. The German air force bought 900 Starfighters of which nearly 300 crashed, killing more than a hundred pilots. 32 German widows intented a class action against Lockheed and, after a ten-year battle, obtained 1.2 million of dollars of repairs.

Kotchian spearheaded the development of the L-1011 jet, which Lockheed began building without a firm commitment from a single airline, a risky move that eventually cost the company billions of dollars.

In 1971, the U.S. government bailed out the company with a $250-million loan as rising development costs for the L-1011 and other military programs were about to put the company out of business. Such move was rather unprecedented and the hidden reason was Lockheed involvment with submarine launch ballistic missiles like the Polaris and Trident.
Had Lockheed been dismantled, those key strategic weapons would have been setback by years.
Yet, only four years after that expensive bailout a government panel set up to oversee the bailout began investigating whether Lockheed had violated its obligations by not disclosing foreign payments.

In a Senate hearing last week, Kotchian said he had traveled to Japan in 1972 to try to interest the Japanese in the jetliner. He said he was approached twice within his first day in Tokyo for payoffs of 500 million yen, or $1.7 million.

He said he made payments to representatives who made "clear" the money would end up in the office of Japan's then Prime Minister Kakuei Tanaka. Another was made to a consultant who said it was needed to gain the interest of an intimate of Tanaka, who was later convicted and sentenced to four years in jail stemming from Kotchian's testimony.

In his memoir, Kotchian wrote that by the time the deal was completed, payments had been made to officials of the airline and six other politicians. Lockheed eventually sold 21 planes, worth $430 million at the time.
In all, Kotchian said he made $12 million in payments to Japanese politicians and businessmen.

"If Lockheed had not remained competitive by the rules of the games as then played, we would not have sold the TriStar's jumbo jet and would not have provided work for tens of thousands of our employees or contributed to the future of our corporation," he said.

During the Senate hearings, Kotchian also said Lockheed had bribed government officials in Italy, Germany and the Netherlands in the 1960s to sell military fighter jets. A central figure in the scandal is Frantz Joseph Strauss, the all powerfull German politician.
There are insisting rumours within the Luftwaffe that back in 1958 the French Mirage III was the prefered option but Starfighters were bought instead, with catastrophic results.
"We don't condone this but . . . it was the only way we could sell aircraft," Kotchian said.
Kotchian's son, Robert, said he never sensed that his father had any regrets or remorse about the payoffs.
"He felt he did the right thing for the good of the company," Kotchian said. "He felt that if he didn't do it, somebody else would. I think he was stuck between a rock and a hard place."

and now Lockheed scandal may reach even further – into space !

Four years ago Lockheed won a hard-fought bid for NASA space tug. Since then their Agena has become an ubiquitous space vehicle that was sold to many aspiring space powers.
What Lockheed did was to use the old Starfighter connections and networks to sell its space tug to Canada, Japan, and the European space agency that includes Germany, Italy and the Netherlands. All these countries bought F-104s for their air forces; all use the Agena space tug for varied missions.

The Church committee found Lockheed guilty of bribing governments to buy Starfighters and Hercules and Tristar transports. Quite inevitably the committee raised suspicion over that other Lockheed best-seller, that is, the Agena.
Senator William Proxmire made public his order for a congressional investigation into whether NASA Administrator James Beggs had violated conflict-of-interest rules when he awarded Lockheed the space tug contract in 1972. Beggs denied the charges, and they were dropped after a brief inquiry.

Morale at Lockheed has been low, particularly at the famed Skunk Works that imagined so many outstanding flying machines.

Ben Rich recently suceeded legendary Clarence Johnson that aparently resigned in disgust after the bribery scandals.
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