Defense Executive Rebuts Flawed Accounts Of Global Arms Trade

Retired Lockheed Martin Senior Vice President Robert H. Trice was so incensed by the errors he saw in recent accounts of the global arms trade that he wrote this rebuttal, describing the real situation. Trice spent much of his career at Lockheed Martin and other defense companies marketing U.S. military technology overseas.

I write in response to John Tirman’s recent (Washington Post November 6, 2011) and generally positive review of Andrew Feinstein’s The Shadow World, Inside the Global Arms Trade. Feinstein provides genuinely interesting and insightful accounts of the illegal activities of clandestine arms merchants such as Bout, Mertins, Minin, Al-Kassar and the like. And his chilling portraits of the institutional corruption associated with the gigantic South African-UK-Germany-Sweden arms deal of 1999, Iran-Contra, the Gripen leases in central Europe and Al Yamamah and Al-Salam programs in Saudi Arabia appear largely accurate. But his attempt to expand this “shadow world” to include large, publicly-owned and traded American aerospace and defense companies is fatally flawed, and for the sake of future researchers his conclusions cannot go uncontested.

Feinstein’s description of the South African affair was based on his personal participation, and his secondary coverage of U.K. arms sales practices came from the solid, fact based research of Leigh and Evans of The Guardian. But he makes a terrible mistake by relying almost exclusively on William Hartung’s 2010 book, Prophets of War and a handful of tired and predictable anti-defense critics—Sprey, Boyd, Spinney, Fitzgerald, Wheeler—to characterize the U.S. defense industry of the 21st century.

Many of Hartung’s, and by extension Feinstein’s, assertions are the product of shoddy scholarship, unsubstantiated conspiracy theories and unfailingly biased judgments. Over and over they confuse the role of contractors who design and deliver weapon systems for sovereign governments with the deployment and use of those systems by civilian and military officials empowered to do so. Their central conclusions are 1) “…that the weapons business profoundly undermines American democracy, representing the ultimate beneficiary of the legalized bribery that proliferates on Capitol Hill” (p. 372); 2) there is a total lack of oversight and control over defense spending (p. 416); and 3) that defense executives can act illegally with impunity (p. 226). When defense budgets rise or systems are delivered late and not canceled, it’s the result of the insidious Military Industrial Complex and the inherently improper influence of industry.

But how about when procurement budgets decline, as they did from 1991-97, and are likely to do so for the next decade, or systems like the F-22 or the Future Combat System are cancelled, or big arms deals such as new F-16s to Taiwan are not made? How did these happen? Here the authors are at a loss because reality is not as simple as they would like it to be. Economic pressures, changing threats and requirements, program performance, politics, media coverage, personalities, lobbying and legislation all play a role in major defense decisions. Both Feinstein and Hartung recount that the F-22 was terminated on the basis of Secretary of Defense Robert Gates calling Lockheed Martin CEO Robert Stevens into his office and essentially saying, “If you oppose me on this, I’ll eat your lunch.” (p. 334). It’s a great story, supposedly relayed by “an observer with inside knowledge,” with only one problem; it never happened.

Both authors spend a lot of effort on historical case studies of bribery but Feinstein at least acknowledges that while repugnant, it was not illegal in the U.S. until passage of the Foreign Corrupt Practices Act (FCPA) in 1977 (pp 356-7), and U. K. anti-bribery laws did not take effect until 2002. Laws matter a lot and in the U.S. the combination of the FCPA, the Arms Export Control Act and Sarbanes-Oxley provide clear guidance to industry. Both repeatedly complain about a lack of transparency, but neither Feinstein nor Hartung ever note that every step of every sale of defense equipment to foreign governments requires a separate State Department export license, and every proposed sale of $50 million or more is reviewed by Congress. Every fall the Administration is required to send Congress the so-called “Javits report,” in which all major arms transactions that could occur in the next fiscal year are listed and form the basis for dialogue and negotiation between the executive and congressional branches.

Feinstein’s accounts of bribery scandals are entertaining, but he fails to discuss what the U.S. Government has done to address the issue. The most effective way to prevent bribery is to keep the recipient’s money separate and distinct from the money received by the provider of defense goods and services. Such an approach denies the provider the resources required for any potential illegal commissions, “slush funds” or “kickbacks”. And this is exactly what the U.S. Government’s Foreign Military Sale (FMS) system does. Under FMS, the U.S. Defense Security Cooperation Agency (DSCA) and the relevant military service negotiate with the U.S. company on behalf of the foreign government recipient. The contract is between the U.S. Department of Defense (DoD) and the American provider. Goods and services are delivered to DoD which then transfers them to the foreign recipient. The arrangement between the U.S. and foreign governments is in the form of Letter of Offer and Agreement (LOA) documents, under which the foreign recipient agrees to pay in advance into a U.S. government trust fund held on its behalf. As items are delivered, DSCA draws funds from the country’s account and pays the contractor. DSCA charges a fee to the recipient to administer the program, and many governments in the developing world are comfortable paying this modest premium to avoid any possible charges of corruption. American contractors prefer FMS arrangements when dealing with countries where potential corruption is possible and/or future cash flow could be an issue. For countries with more advanced acquisition systems that do not want to pay the FMS surcharge, the alternative is a Direct Commercial Sale (DCS) between the contractor and the foreign government, with the same U. S. government licensing, auditing and oversight requirements. It is amazing that these “insider accounts” of the arms trade never mention the FMS and DCS mechanisms, each of which account for roughly half of America’s defense exports.

Concerning oversight, contrary to the picture painted by Hartung and Feinstein, the U.S. defense industry is among the most highly regulated business sectors on the planet. More than 4,000 employees of the Defense Contract Auditing Agency (DCAA), 10,000 civilians in the Defense Contract Management Agency (DCMA), and 1,475 auditors in DoD’s Office of the Inspector General work in support of the Office of the Secretary of Defense acquisition community, individual service program management offices and Congress’ auditing arm, the General Accountability Office (GAO), to ensure the taxpayers’ monies are protected. In addition to all these agencies, protected whistleblowers in both government and industry, a knowledgeable and aggressive media devoted to aerospace and defense, and legions of independent think tanks and headline-seeking congressmen and their staffs make for an ongoing and vigorous public debate on almost every topic related to American defense policy.

Feinstein’s repeated assertions that defense executives are “above the law” (p. 278) and act with impunity certainly do not apply in the U.S. and are undermined by his own examples. The procurement scandals he describes involving Congressman Duke Cunningham, Darlene Druyun, Michael Sears, Mitch Wade, Dusty Foggo and others all ended with jail time. Iran-Contra resulted in 11 Reagan administration officials, including the Secretary of Defense, being convicted for their illegal conduct.

Hartung’s numerous factual errors taint the credibility of Feinstein’s work. Lockheed Martin did not provide interrogators to Abu Ghraib or Guantanamo Bay (p.414). Romania has not bought any F-16s, much less $4B worth (pp 337-8). Northrop Grumman, not Lockheed Martin, built the ships for the Coast Guard’s Deepwater program (pp. 339-40). The competition for the Littoral Combat Ship was between Lockheed Martin and a General Dynamics/Austal team, not Northrop Grumman (p. 340). Bruce Jackson, who Hartung and Feinstein claim was Lockheed’s principal and secret salesman to NATO and Iraq, was never Vice President of International Operations (p. 289), much less CEO Norm Augustine’s “successor” (p. 290). He was a staff vice president in the corporate strategic planning department with absolutely no marketing role. On his own time, he was also Chairman of the U.S. Committee to Expand NATO, a privately funded interest group. He left Lockheed Martin in 2002 and co-founded the Committee for the Liberation of Iraq. The implication (p. 395) that he did so to somehow benefit his former employer is untrue. The bold but unsupported declaration that, “After KBR, Lockheed Martin was the second largest contractor to the U.S. in Iraq and Afghanistan” (p. 414) is simply wrong. Hartung’s and Feinstein’s depiction of former CEO Norm Augustine as lobbyist and powerbroker (pp. 287ff) is a laughable caricature and a disservice to a lifetime devoted to advancing the common good. In contrast to their description of the Polish F-16 program (pp. 291-1), had either bothered to ask Polish or U.S. government officials they would have found it to have been highly successful in all respects, without a hint of corruption, and has resulted in Polish pilots routinely and safely flying the most advanced fighters in Europe.

Finally, credibility requires some degree of objectivity concerning one’s subject. But Feinstein’s and Hartung’s passionate antipathy for most everyone associated with weapons systems acquisition of any kind, from notorious criminals to military officers to congressmen to CEOs of Fortune 100 companies, is palpable and makes it difficult for readers to distinguish fact-based insights from cynical hyperbole and misstatements. At one point Feinstein says, “I can’t imagine…any defense industry executive, grappling with the fundamental problem of whether it is even possible to be an ethical arms company” (pp 149-50). Having spent 28 years in the business, I can attest that this is exactly what I and hundreds of my colleagues and competitors in the senior ranks of U.S. aerospace and defense industry do every single day. Transgressions by heritage companies a half century ago cannot be defended or excused. But 21st century American aerospace executives are committed to setting and maintaining the highest legal and ethical standards. Lockheed Martin’s code of ethics and its annual compliance training for all employees, beginning with the CEO and his direct reports, are a world standard for global industries, and have been for the last 15 years. Rather than impugn the integrity of those who provide critical systems and support to those entrusted to protect the nation and its allies, we would all be better served by a more balanced analysis. But that would require a degree of objectivity and generosity of spirit that elude both Hartung and Feinstein.