Lockheed bribery scandals

The Lockheed bribery scandals encompassed a series of bribes and contributions made by officials of U.S. aerospace company Lockheed from the late 1950s to the 1970s in the process of negotiating the sale of aircraft.

The scandal caused considerable political controversy in West Germany, Italy, the Netherlands and Japan. In the U.S. the scandal nearly led to the corporation's downfall, as it was already struggling due to the commercial failure of the L-1011 airliner.

Background

The U.S. Government had bailed out Lockheed in 1971, guaranteeing repayment of $195 million in bank loans to the company. The Government Emergency Loan Guarantee Board, set up to oversee the program, investigated whether Lockheed violated its obligations by failing to tell the board about foreign payments. [ [http://www.time.com/time/magazine/article/0,9171,917751-1,00.html Time magazine] August 18, 1975]

In late 1975 and early 1976, a sub-committee of the U.S. Senate led by Senator Frank Church concluded that members of the Lockheed board had paid members of friendly governments to guarantee contracts for military aircraft. [ [http://www.fjs.de/faq5.html Franz Josef Strauß (German language)] ] In 1976, it was publicly revealed that Lockheed had paid $22 million in bribes to foreign officials [ [http://www.time.com/time/magazine/article/0,9171,917751-1,00.html Time magazine] August 18, 1975] in the process of negotiating the sale of aircraft including the F-104 Starfighter, the so-called "Deal of the Century."

Germany

Former Lockheed lobbyist Ernest Hauser told Senate investigators that Minister of Defence Franz Josef Strauß and his party had received at least $10 million for West Germany's purchase of 900 F-104G Starfighters in 1961. The party and its leader denied the allegations, and Strauß filed a slander suit against Hauser. As the allegations were not corroborated, the issue was dropped [ [http://www.time.com/time/magazine/article/0,9171,914576-2,00.html Time magazine] September 13, 1976] .

In September 1976, in the final phase of the 1976 Bundestag election, the controversy was re-opened when questions were asked about the whereabouts of the "Lockheed documents" within the Federal Ministry of Defence. In the course of the investigations, it emerged that most of the documents had been destroyed in 1962. The whereabouts of the documents was again discussed in a committee of inquiry meeting of the Bundestag between January 1978 and May 1979 [ [http://www.fjs.de/faq5.html Franz Josef Strauß (German language)] ] .

Italy

The Italian branch of the Lockheed scandal involved the bribery of Christian Democrat politicians to favor the purchase by the Italian Air Force of C-130 Hercules transport planes. The allegations of bribery were supported by political magazine "L'Espresso", and targeted former Cabinet ministers Luigi Gui and Mario Tanassi, the former Prime Minister Mariano Rumor and notably then-President Giovanni Leone, forcing him to resign his post on June 15, 1978 [ [http://www.guardian.co.uk/obituaries/story/0,3604,591702,00.html Guardian obituary, November 12, 2001] ] .

One of the planes crashed near Pisa on March 3, 1977, killing the crew and 38 young Air Force Academy cadets on board. [ [http://aviation-safety.net/database/record.php?id=19770303-0 Aviation Safety Net database entry] ]

Japan

The scandal involved the Marubeni Corporation and several high-ranking members of Japanese political, business and underworld circles, including Finance Minister Eisaku Sato and the JASDF Chief of Staff Minoru Genda. In 1957, the Japanese Air Self-Defense Force wished to buy the Grumman F-11 Super Tiger to replace the F-86 Sabre then in service, but heavy lobbying by Lockheed of the key LDP figures led to the adoption of the F-104 instead.

Later, Lockheed had hired right-wing nationalist underworld figure Yoshio Kodama as a consultant in order to influence Japanese parastatal airlines, including All Nippon Airways (ANA), to buy the L-1011 instead of the McDonnell Douglas DC-10. On February 6, 1976, the vice-chairman of Lockheed told the Senate subcommittee that Lockheed had paid approximately $3 million in bribes to the office of Japanese Prime Minister Kakuei Tanaka for aid in the matter.

Lockheed paid ¥2.4 billion to earn the contract from ANA. ¥500 million of the total was received by the Prime Minister. ¥160 million was received by ANA's officials. ¥1.7 billion was received by Kodama. [ [http://www.pitt.edu/~ethics/Japan/case.html University of Pittsburgh, International Business Ethics: Japan] ] On October 30, 1972, ANA announced its decision to purchase 21 Lockheed Tristar L1011s, which cost approximately $5 million each, even though it had previously announced options to purchase the DC-10. [ [http://www.time.com/time/magazine/article/0,9171,914484,00.html Time magazine, August 9, 1976] ]

Tanaka was arrested on July 27, 1976 and was released in August on a ¥200 million ($690,000) bond. He was found guilty by a Tokyo court on October 12, 1983 for violations of foreign exchange control laws but not on bribery. He was sentenced to four years in prison, but remained free on appeal until his death of a stroke in 1993. [ [http://www.rcrinc.com/tanaka/ch4-3.html Kakuei Tanaka - a political biography of modern Japan: Chapter 4 The Lockheed Scandal] ] [ [http://www.time.com/time/magazine/article/0,9171,914576-3,00.html Time Magazine] September 13, 1976]

Netherlands

Prince Bernhard received a $1.1 million bribe from Lockheed to ensure the Lockheed F-104 would win out over the Mirage 5 for the purchase contract. He had served on more than 300 corporate boards or committees worldwide and had been praised in the Netherlands for his efforts to promote the economic well-being of the country. Prime Minister Joop den Uyl ordered an inquiry into the affair, while Prince Bernhard refused to answer reporters' questions, stating: "I am above such things" [ [http://www.timesonline.co.uk/article/0,,3-1387624,00.html Times article] December 4, 2004] . Prince Bernhard always denied the charges, but after his death on December 1, 2004 interviews were published showing that he admitted taking the money. He said: "I have accepted that the word Lockheed will be carved on my tombstone." [ [http://www.timesonline.co.uk/tol/news/world/article398546.ece Times article] December 3, 2004]

audi Arabia

Between 1970 and 1975, Lockheed paid Saudi Arms dealer Adnan Khashoggi $106 million in commissions. Khashoggi himself is said to have made hundreds of millions from other corporations in this period, however as Khashoggi was a mediator for bribes, his payment included money destined for officials. His commissions started at 2.5% + and eventually rose to as much as 15%. Khashoggi "became for all practical purposes a marketing arm of Lockheed. Adnan would provide not only an entree but strategy, constant advice, and analysis," accoring to Max Helzel, then vice president of Lockheed's international marketing.cite news | first=RICHARD | last=STENGEL | coauthors= | title=Cover Stories: Khashoggi's High-Flying Realm | date=1987-01-19 | publisher= | url =http://www.time.com/time/magazine/article/0,9171,963261-5,00.html | work =Time (magazine) | pages =5 | accessdate = 2008-08-25 | language = ]

United States

Lockheed chairman of the board Daniel Haughton and vice chairman and president Carl Kotchian resigned from their posts on February 13, 1976. The scandal also played a part in the formulation of the Foreign Corrupt Practices Act which President Jimmy Carter signed into law on December 19, 1977, which made it illegal for American persons and entities to bribe foreign government officials. [ [http://www.super70s.com/super70s/Tech/Aviation/Aircraft/Lockheed.asp Super70s.com] ]

According to Ben Rich, director of Lockheed's Skunk Works: cquote|Lockheed executives admitted paying millions in bribes over more than a decade to the Dutch (Prince Bernhard, husband of Queen Juliana, in particular), to key Japanese and West German politicians, to Italian officials and generals, and to other highly placed figures from Hong Kong to Saudi Arabia, in order to get them to buy our airplanes. Kelly was so sickened by these revelations that he had almost quit, even though the top Lockheed management implicated in the scandal resigned in disgrace. [Rich, Ben R. and Janos, Leo. "Skunk Works: A Personal Memoir of My Years at Lockheed". New York: Little Brown & Co., 1994, p. 10. ISBN 0-75151-503-5.]

References