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Part 2, Alabama Aircraft Industries Sues Boeing

Brandon Moseley

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By Brandon Moseley
Alabama Political Reporter

This is the second part of our series on how The Boeing Company allegedly used bid rigging, politics, and violated trade secrets to drive an Alabama competitor (Alabama Aircraft Industries/formerly PEMCO) out of business. Last week we discussed how Hayes Aircraft, later Precision Standard, then PEMCO, and finally Alabama Aircraft Industries rose to become the primary contractor doing Programmed Depot Maintenance on the Air Force’s KC-135 Stratotanker fleet and how their niche was challenged by The Boeing Company. AAI is currently suing The Boeing Company for $100 million in federal court alleging that the corporate giant engaged in patterns of misconduct that cheated the Alabama company out of contracts, revenues, and intellectual property.

The Alabama Political Reporter recently sat down with both the former Chairman of the Board of Alabama Aircraft Industries (AAI) Skip Bowling and AAl bankruptcy Trustee Joe Ryan about the downfall of Pemco/Alabama Aviation and the lawsuit against Boeing that alleges Boeing is directly responsible for Pemco’s decline.

Former AAI Chairman of the Board Skip Bowling said, “In my days, working for Lockheed, Lockheed/Martin, I worked for a company whose emphasis was on ethics and contract commitments was absolutely sacred. There was no way that anybody in our firm, during those years, would have ever treated a company, particularly a smaller company, in the way that Alabama Aircraft was treated by Boeing in the instance that we are discussing, today. It was absolutely unheard of. So when I watched as this thing developed, I can say without any hesitation at all, that I have never seen anything quite as egregious as the conduct of Boeing with regard to this small company in Alabama that was doing good work, productive work, cost-efficient work, quality work and that ended up in the situation that it did.”

Chairman Bowling said, “I have never witnessed in my career, a 40 year career, anything close to it. It was devastating for me to watch. Of course, devastating to watch the company with all of its employees have to go through something that they should not have had to go through. It was a case of what I would call corporate bullying.”

In 2003 the Air Force announced it was going to lease 100 new Boeing built KC-767 tankers to replace 135 of the older KC-135 Stratotankers. Principal Deputy Undersecretary of the Air Force for Acquisition Darleen Dryun was assigned the job of negotiating that contract for the Air Force. The price she negotiated for the lease was 60% higher than if the Air Force had purchased the $150 million a plane, tankers outright. Sen. John McCain (R) from Arizona objected to the absurd $21 billion price tag of the lease. Sen. McCain called the lease “corporate welfare” and “fraud.”

As Sen. McCain’s demands grew louder and more strident an investigation was finally launched. The General Accounting Office (GAO) calculated that the lease would cost the taxpayers up to $1.3 billion more than an outright purchase of the new planes. Realizing that the government was being cheated in the proposed deal the investigation soon centered around Darleen Druyun, at that time a new Boeing Vice President. The investigation revealed that Darleen Druyun as the #2 procurement officer in the U.S. Air Force had agreed to give Boeing the absurd price in exchange for her getting a $250,000 a year VP job for herself with the corporate giant and a generous $50,000 signing bonus. Dryun negotiated this deal directly with Boeing Chief Financial Officer Michael Mears. Druyun had previously negotiated jobs for her daughter and son in law with Boeing.

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Scores of contracts that Ms. Druyun either awarded or reviewed were scrutinized by investigators, including 11 contracts valued over $33 billion awarded from September 1997 to September 2001 in which Ms. Druyun had the final say. Boeing was awarded all or part of the winning bid in five, which are valued over $16 billion. One of those contracts

awarded by Ms. Druyun in that time period was the KC-135 Stratotanker PDM contract Boeing had received in 1998. The contract had for decades been owned by PEMCO. Ms. Druyun had made the decision to combine the KC-135 Stratotanker PDM contract with the A10 PDM contract putting PEMCO in an impossible position to bid since they lacked the experience to perform the maintenance on the close air support fighter bomber.

Senator McCain said in a speech on the Senate floor, “I simply cannot believe that one person, acting alone, can rip off taxpayers of possibly millions of dollars.” “This appears to be a case of either a systemic failure in procurement oversight, willful blindness, or rank corruption. Either way, full accountability among Air Force leadership is in order.”

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Boeing VP Duryun pled guilty to rigging the KB-767 contract in Boeing’s favor and sharing information on the EADS Airbus A330 competing bid with Boeing. She also admitted wrongfully awarding Boeing the small diameter bomb contract and was sentenced to nine months in prison. Boeing CFO Michael Mears resigned his position after it was discovered that he had personally negotiated with Druyun and was sentenced to four months in prison. Boeing CEO Phil M Condit resigned and the company paid a $615 million fine but did not admit guilt.

When all of this became public, it was readily apparent to then Precision Standard executives that Druyun had linked the A10 maintenance with the KC-135 maintenance contract to benefit Boeing who won the bid for the KC-135 PDM work. According to Chairman Bowling, the principal owner and Chairman of Precision Standard at the time “was a gentleman by the name of Matthew Gold. He was a lawyer by background in addition to being the owner of this company. He instituted a lawsuit.” In his lawsuit he argued that the FY1998 KC135 PDM contract was improperly awarded to Boeing based on misconduct by Boeing and Darleen Druyun. The General Accounting Office (GAO) agreed with that finding. Unfortunately for Precision Standard, suing Boeing and the

Air Force would mean suing the very military that they depended on for contracts and the defense contractor who held the contract that was by far the biggest that Precision Standard had. Eventually the Board would let that original lawsuit drop not because it lacked merit but because it would damage the company’s relationships with the American military. This would not be the end of the Alabama companies’ difficulties with Boeing.

Due to Boeing’s inability to execute performance on the KC-135 contract awarded to them, PEMCO and The Boeing Company split the KC-135 PDM work between PEMCO’s Birmingham Airport facility and Boeing’s San Antonio facility at Dryun’s request. In their lawsuit, Alabama Aircraft Industries states that Boeing withheld parts from PEMCO in favor of their San Antonio facility to keep PEMCO from receiving bonus money from the U.S. Air Force for timely completion of their services. Alabama Aircraft Industries also maintains that through the contractor-subcontractor relationship that Boeing required access to PEMCO’s processes procedures and systems integration points and that PEMCO intellectual property was used to upgrade and improve Boeing’s own KC-135 PDM work. PEMCO was never paid by Boeing for any of its intellectual property. AAI also asserts that Boeing lied to them about the U.S. Air Force demanding price cuts on their work. AAI was able to cut their price by $750,000 to $760,000 per plane. AAI claims Boeing never passed any of that saving on to the Air Force or the taxpayers and instead pocketed the difference while still charging the Air Force the original agreed upon price for work done on KC-135 PDM by PEMCO. Chairman Bowling said that he believes that Boeing was making a conscious decision to starve PEMCO of funds knowing that the two companies would likely one day again be competitors for a future KC-135 PDM contract.

Looking back on it, Chairman Bowling said that Boeing’s treatment of Alabama Aircraft Industries (AAI) was “sort of a singular bad event in the aerospace industry.” “It was just inexcusable what happened but that’s where we are today.”

To Be Continued

Next Week we present part 3 of our story on the AAI vs. Boeing litigation

AAI and Boeing prepare to bid as partners on a new KC-135 PDM contract but AAI is betrayed.

Brandon Moseley is a senior reporter with eight and a half years at Alabama Political Reporter. You can email him at [email protected] or follow him on Facebook. Brandon is a native of Moody, Alabama, a graduate of Auburn University, and a seventh generation Alabamian.

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Elections

Coalition of attorneys general file opposition to Alabama attempt to ban curbside voting

The AGs argue that Alabama’s suggestion to the courts that curbside voting invites fraud is “unfounded.” 

Eddie Burkhalter

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A coalition of 17 state attorneys general have filed an opposition to Alabama’s attempt to get the U.S. Supreme Court to ban curbside voting. 

In a friend-of-the-court brief, led by District of Columbia Attorney General Karl Racine, the attorneys general argue to that curbside voting is safer for those at greatest risk from COVID-19, and that a ban on the practice would disproportionately impact the elderly, the disabled and Black Alabamians.

They also argue that Alabama’s suggestion to the courts that curbside voting invites fraud is “unfounded.” 

“The Presidential Advisory Commission on Election Integrity, established by President Trump following the 2016 election, ‘uncovered no evidence to support claims of widespread voter fraud,’” the brief states, adding that there is no evidence that curbside voting in the many states that allow it invites fraud. 

“The practice is longstanding and widespread—as noted, more than half of states have historically offered curbside voting in some form,” the brief continues. 

Alabama Attorney General Steve Marshall on Oct. 13 said the state will appeal to the U.S. Supreme Court a federal appeals court ruling allowing curbside voting in the Nov. 3 election. 

A panel of federal appeals court judges on Oct. 13 reversed parts of U.S. District Judge Abdul Kallon’s Sept. 30 ordered ruling regarding absentee voting in the upcoming Nov. 3 elections, but the judges let the previous ruling allowing curbside voting to stand. 

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The lawsuit, filed by the NAACP Legal Defense and Educational Fund, Southern Poverty Law Center, American Civil Liberties Union, ACLU of Alabama and Alabama Disabilities Advocacy Program, was brought on behalf of several Alabamians with underlying medical conditions. 

“Curbside voting is a longstanding, secure voting option that local jurisdictions have made available to protect the health of vulnerable voters, including elderly, disabled, and voters with underlying health issues,” Racine said in a statement. “Curbside voting minimizes the risk to persons who are particularly susceptible to COVID-19, and local jurisdictions should be able to offer this common-sense accommodation to voters. State Attorneys General will keep fighting to ensure that voters can safely make their voices heard at the ballot box this November.”

The brief filed by the coalition of state attorneys general comes as the number of COVID-19 hospitalizations across Alabama has been ticking upward.

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Racine is joined in the brief by attorneys general from California, Connecticut, Delaware, Hawaii, Illinois, Maryland, Michigan, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Vermont, Virginia and Washington.

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News

Alabama revenues grew despite COVID pandemic, analysis shows

Tax revenue into the state’s General Fund was 7 percent higher this year the Education Trust Fund brought in an additional $209 million in 2020 compared to 2019. 

Eddie Burkhalter

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(STOCK PHOTO)

Alabama’s strong economy going into the COVID-19 pandemic, and billions in federal aid to address the health and economic crisis, has helped the state’s two largest budget funds to grow this year, according to a study released Thursday. 

According to an analysis by the Public Affairs Research Council of Alabama, tax revenue into the state’s General Fund was 7 percent higher this year than it was in 2019, and Alabama’s Education Trust Fund brought in an additional $209 million in 2020 compared to 2019. 

“According to Finance Department officials, Alabama ended 2020 with $330 million balance in the ETF and a $315 million balance in the General Fund,” wrote PARCA’s Tom Spencer in the report. “That was result both of revenues that exceeded the budgeted amounts and expenditures that were lower than what was appropriated.”

The growth came despite the spike in unemployment that began in March and hasn’t yet abated, and despite mandatory business closures in March and April and the restrictions still in place to protect against the spread of the coronavirus. 

The author of the report said the growth is due in part to the state’s strong economy before the pandemic hit. Unemployment was at a historic low between October and March, and prior to the pandemic, income tax receipts were up approximately 7 percent over the same period in 2019. 

Additionally, $4.1 billion in federal COVID-19 aid has been committed to individuals and municipalities in Alabama, and consumer spending shifted but didn’t stop, the author notes. 

The federal Paycheck Protection Program preserved payrolls, and unemployed workers received $600 per week in a supplement to unemployment insurance, which both helped prevent the state’s tax revenue from taking a bigger hit. 

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“Sales taxes dropped, then recovered and have been up and down in the months since. At the same time though, tax on internet purchases surged, offsetting the erosion in sales tax. Unlike some other states, Alabama’s sales taxes apply to groceries and medicine and thus it tends to be more stable,” Spencer wrote in the report. 

Several sectors of Alabama’s economy have done well during the pandemic, including the state’s Alcohol Beverage Control Board, which contributed an additional $17 million to the General Fund, an increase of 14 percent. 

But still other sectors suffered, including lodging tax. The tax on hotels and vacation rentals was down 15 percent for the year, and collected almost $9 million less for the General Fund.

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“For the current fiscal year, FY 2021, Finance officials are relatively confident that revenues will more than cover the budgets. Lawmaker scaled back spending plans in light of the pandemic,” Spencer wrote in the report. “As long as there aren’t additional unforeseen shocks to the economic system, the Alabama economy should generate the revenue needed to make the budgets as adopted this spring.”

If the state’s economy were to take a larger hit, Spencer noted, the state still has rainy day funds for both funds. 

RESERVE FUND BALANCES

  • ETF Budget Stabilization Fund – $373,269,077
  • ETF Rainy Day Account – $465,421,670
  • GF Budget Stabilization Fund – $27,297,483
  • GF Budget Rainy Day Account – $232,939,781

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Featured Columnists

Opinion | Electing Tuberville could cost Alabama billions

If your conscience or decency isn’t enough, vote your wallets.

Josh Moon

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Sen. Doug Jones, left, and Senate candidate Tommy Tuberville, right.

Money matters in Alabama. Oh, I know that we’re not supposed to say that out loud. That we’re supposed to promote our image of southern grace and hospitality, of churchiness and care, of rich people never getting into heaven. 

But the truth is greed is our biggest character flaw in this state. 

Every problem we have can be traced back to our unending thirst for dollars. Our ancestors didn’t keep slaves because they hated black people. They did it because they loved money and the difference in skin color gave them an excuse — a really, really stupid excuse — to mistreat other humans to take advantage of the free labor. 

Our rivers and lakes and dirt aren’t filled with poisons from factories because we’re too dumb to understand how this works. They’re that way because our politicians are paid off to turn a blind eye to the dumping of toxic waste. 

Our schools aren’t terrible because we have dumb kids or bad teachers. It’s because we’re too cheap to pay for them. 

You see what I mean? It’s our lust for the almighty dollar. Every time. 

We love money. 

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Which makes me seriously wonder why so many people in this state are going to vote for a man who will cost us all — and especially our biggest businesses — so much of it. 

Tommy Tuberville will be like a money vacuum for Alabama. Billions of dollars will vanish for this welfare state that relies so much on federal contracts, federal programs and federal dollars. 

If you doubt this, don’t simply take my word for it. Just Google up the press releases from Sen. Richard Shelby’s office from the last, say, six years — the most recent span in which Republicans have controlled the Senate. 

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Almost every single release is about Shelby securing millions or billions of dollars in federal funding for this project or that project, getting the state’s share of dollars from a variety of different programs and initiatives implemented by Congress. 

Shelby and I obviously have different political viewpoints, but it’s hard to argue that the man has been successful in securing money for Alabama. Lots and lots of money. 

Money for airports and roads. Money for defense contractors in Huntsville. Money for the port in Mobile. Money for car manufacturers. Money for farmers. 

Money. Money. Money. 

Shelby can do that because of three things: He’s on the right committees, he’s a member of the party in power and he’s liked by the right people.

Tuberville will be none of those things. 

Most pundits are predicting that Democrats will take over the Senate, tipping the balance of power and giving the party control of both houses and the White House. 

That automatically means that a first-time senator in the opposition party will have little to no say in any decisions. 

But what’s worse for Tuberville, and for Alabama, is that other Republicans don’t like him either. 

Establishment Republicans essentially openly campaigned against Tuberville in the primary, tossing tens of millions of dollars behind his opponent, Jeff Sessions. They even favored third-place finisher Bradley Byrne over Tuberville. 

It’s not hard to understand why — he’s clueless. 

I know that’s a Doug Jones talking point, but this one happens to be true. Let me give you an example: On Thursday, Tuberville tweeted out what was meant to be a shot at Jones, claiming that Alabama’s current senator wouldn’t meet with Trump’s Supreme Court nominee because Jones knows “he won’t have much time in the Senate to work with her.”

If you’re unaware, the Senate doesn’t “work with” the Supreme Court. They’re separate entities. 

Combine that with his other nonsensical answers on COVID relief, school reopenings, the Voting Rights Act, senate committee assignments, education, foreign affairs — really, the list is almost endless — and it shows how little work he’s put in over the last two years to understand this job he’s applying for. 

Now, that might be just fine with Alabama voters who care more about the party affiliation and owning the libs, but it’s not OK with grownups who take the job of running the country seriously. 

And those people — both Rs and Ds — don’t like Tuberville or his here-for-an-easy-check-like-always approach to one of the most serious jobs in the world. 

He will be frozen out of the most sought after committee assignments. His voice will carry zero weight. His presence will be all but forgotten. 

And in the process, so will Alabama. Especially in two years, when Shelby retires and his senior status is lost. 

In the meantime, Jones is highly respected by senators on both sides of the aisle. He already has a presence on top committees, and is so well liked within the Democratic Party that he’s on the short list to be Joe Biden’s AG, should he not be re-elected. 

The choice seems pretty simple. On the one hand is a competent, prepared and serious statesman who knows how to maneuver his colleagues to get the most for the state. On the other hand is an unprepared, uncaring, lazy carpetbagger who doesn’t understand any process. 

If your conscience or decency isn’t enough, vote your wallets.

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Health

At least 248 COVID deaths reported in Alabama in October

The cumulative death toll in Alabama has risen by 248 to 2,788 in October and by 124 in the last week alone.

Brandon Moseley

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(STOCK PHOTO)

We’re a little more than halfway through the month of October and the Alabama Department of Public Health has already reported at least 248 deaths from COVID-19.

The cumulative death toll in Alabama has risen by 248 to 2,788 in October and by 124 in the last week alone.

At least 378 deaths were reported in the month of September, a rate of 12.6 deaths per day over the month. In the first 17 days of October, the rate has been 14.6 deaths per day, a 15.9 percent increase from September.

Deaths were higher in July and August. The cumulative death toll increased by 582 in August and 630 in July, the worst month of the pandemic for the state.

On Saturday, ADPH reported that 1,288 more people in the state were confirmed positive with the coronavirus, and on Sunday the count increased by 964. The number of confirmed cases in Alabama has risen to 172,626.

There have been 17,925 new cases Alabama in October alone. The state is averaging almost 996 cases per day in October, which is up from September.

The state had 28,643 new coronavirus cases in September, 38,335 cases new cases in August, and 49,678 cases in July. Public health officials credit Alabama Governor Kay Ivey’s statewide mask order on July 15 with slowing the spread of the virus in the state, but the virus has not gone away.

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ADPH reported 823 hospitalizations for COVID-19 on October 17, the most recent day for which we have data. While hospitalizations for COVID-19 are down from the peaks in early August in Alabama have risen from Oct. 1 when 748 Alabamians were hospitalized, a 10 percent increase from the first of the month.

The state of Alabama is continuing to struggle to protect its most vulnerable citizens. At least 6,497 residents of long term care facilities in Alabama have been diagnosed with the coronavirus, 247 of them in October.

There have also been 3,362 cases among long term care workers in Alabama, including 197 in the month of October. Some 9,819 Alabama health care workers have also contracted the coronavirus.

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Most people who test positive for the novel strain of the coronavirus, SARS-CoV-2, are asymptomatic or have only minor symptoms, but in about one out of five cases it can become much more severe.

For older people or people with underlying medical conditions like obesity, heart disease, asthma, cancer, diabetes or HIV, COVID-19 can turn deadly. COVID-19 is the abbreviated name for the medical condition caused by the SARS-CoV-2 virus.

Some 1,115,600 people worldwide have died from COVID-19 worldwide, including 224,284 Americans. There are 8,972,704 known active cases in the world today.

Public health officials warn citizens that coronavirus remains a present danger in our community. Social distancing is the best way to avoid spreading the virus. Avoid venues with large groups. Don’t shake hands or hug persons not living in your household.

Avoid leaving your home as much as possible and wear a mask or cloth face covering when you do go out. Avoid touching your face and wash your hands with soap frequently. Hand sanitizer is recommended.

A coronavirus vaccine may be available in the coming months, but we don’t yet know when or how effective it will be.

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