The key agent used by Lockheed in Japan was one Yoshio Kodama, aka ‘The Monster’. After spending three years in prison on war crimes charges after the Second World War, Kodama was set free by the US occupying forces on the grounds that he would make a good ally in the Cold War fight against communism. He then took his fortune – earned by supplying Japanese troops during the war and looting diamonds and platinum from areas conquered by Japan – and put it to work in his country’s politics. Variously described as an organized crime boss and a CIA asset, he helped found and fund the dominant Liberal Democratic Party.
In the late 1950s, Lockheed paid bribes of about $1.5m to $2m to various officials and a fee of $750,000 to Kodama to secure an order for 230 Starfighter planes. The details of the bribes were passed on to the CIA, which confirmed that every move made was approved by Washington. Lockheed was seen to be conducting a deep layer of Washington foreign policy.
This marked the high point of the Starfighter. It was sold to the German air force, and over a ten-year period crashed 178 times, killing a total of eighty-five German pilots. It earned the nickname ‘the Flying Coffin’, and a group of fifty widows of the pilots sued the company.
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The SEC offered an amnesty for companies admitting to questionable or illegal payments; over 450 US companies admitted making such payments worth over $300m to government officials, politicians and political parties. Over 117 of the self-reporting entities were Fortune 500 companies. Many of the payments were justified as ‘facilitation payments’ or ’commissions. Despite the lurid accounts of not only Lockheed’s activities around the world, but similar schemes by scores of other companies, there was no re-imagining of ethics in the violent, corrupt world of the arms dealers, but there was a dramatic recognition of the scale and damage of corruption in the US. The demand for stronger regulation and banning of bribery was resisted by corporate interests which argued that it would put the US at an economic disadvantage.
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By the end of Reagan’s second term military spending doubled, marking the largest peacetime military build-up in US history. This was a massive windfall for the MICC, with, for instance, Lockheed’s Pentagon contracts doubling to $4bn a year from 1980 to 1983.
Resistance to this massive build-up was slow in coming, partly because of its popularity among ordinary Americans. But towards the end of Reagan’s first term, criticism was voiced of both the excessive size of the build-up at a time of growing deficits and social needs, and fear that the massive increase in nuclear weapons could exacerbate the risk of a superpower nuclear confrontation. The latter led to the nuclear freeze campaign, one of the most inspiring citizens’ movements of the twentieth century, while the former forced at least a slow-down in the military build-up.
Among the most effective tools of Reagan’s critics were two vastly overpriced items: a $600 toilet seat and a $7,662 coffeemaker. At a time when Caspar Weinberger was telling Congress that there wasn’t ‘an ounce of waste’ in the largest peacetime military budget in the nation’s history, the spare parts scandal opened the door to a more objective – and damning – assessment of what the tens of billions in new spending was actually paying for. It also opened up Weinberger to ridicule, symbolized most enduringly in a series of cartoons by the Washington Post cartoonist Herblock in which the Defense Secretary was routinely shown with a toilet seat around his neck. Appropriately enough, the coffeemaker was procured for Lockheed’s C-5A transport plane, the poster child for cost overruns and abject performance.
A young journalist, who had been mentored by the Pentagon whistle-blower Ernie Fitzgerald, was central to exposing the scandals. Dina Rasor fingered the aircraft engine makers Pratt & Whitney for thirty-four engine parts that had all increased in price by more than 300 per cent in a year. A procurement official noted in the memo which revealed the scam that ‘Pratt & Whitney has never had to control prices and it will be difficult for them to learn.’
This profiteering at the taxpayer’s expense was surpassed by the Gould Corporation, which provided the Navy with a simple claw hammer, sold in a hardware store for $7, at a price of $435. The Navy suggested the charges – $37 for engineering support, $93 for manufacturing support and a $56 fee that was clear profit – were acceptable. Further revelations included Lockheed charging the Pentagon $591 for a clock for the C-5A and $166,000 for a cowling door to cover the engines. The exorbitant coffeemakers were exposed as poorly made and needing frequent repairs. Lockheed was also billing the taxpayer over $670 for an armrest pad that the Air Force could make itself for between $5 and $25. Finally, it was discovered that a $181 flashlight was built with twenty-year-old technology and a better one could be bought off the shelf for a fraction of the cost.
Lockheed defended itself by pointing out that spare parts were only 1.6 per cent of the defence budget, suggesting that those uncovering the fraud, waste and abuse were the enemies of peace and freedom and should remain silent in the interests of national unity in the face of global adversaries. Ernie Fitzgerald again brought sanity to bear, by suggesting that an overcharge was an overcharge, and that the same procurement practices used with toilet covers and coffeemakers when applied to whole aircraft like the C-5A made the planes ‘a flying collection of spare parts’.
Rasor also revealed that the Air Force planned to pay Lockheed $1.5bn to fix severe problems with the wings on the C-5A that the company itself had created. The wing fix was little more than a multibillion-dollar bailout for Lockheed.
Despite this litany of disasters, the Air Force engaged in illegal lobbying to help Lockheed win the contract to build the next-generation transport plane. In August 1981, a McDonnell Douglas plane was selected for the project, with the Air Force concerned about Lockheed’s proposed C-5B. Two weeks later the Air Force reversed its decision. Rasor could not believe that the Air Force ‘would want to have an updated version of one of its most embarrassing procurements’.
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