By Brandon Moseley
Alabama Political Reporter
This is the final chapter in our four part series covering Alabama Aircraft Industries (AAI)/formerly PEMCO) landmark $100 million lawsuit against The Boeing Company. AAI alleges that Boeing used bid rigging, political lobbying, and the theft of trade secrets to drive an Alabama competitor, AAI, out of business.
In part 3, we discussed how Boeing allegedly gained access to PEMCO’s processes and proprietary intellectual property thru the two company’s joint efforts to bid as partners on the Air Force KC-135 PDM contract. Boeing then ended the partnership to pursue the contract on their own. On June 12, 2006 PEMCO filed a protest with the USAF asking that the Air Force amend the FY08 KC-135 PDM contract to allow new bidders. The USAF agreed, and PECMO was given a 60 day window to make its own proposal. The short window to submit a bid meant that PEMCO did not have time to seek out another industry partner to replace Boeing and were forced instead to go it alone on the bid. PEMCO/AAI then prepared its own bid on the ten year contract to do the programmed depot maintenance (PDM) on the KC-135 Stratotankers at its Birmingham facility. The fate of the company was hanging on winning the PDM contract to continue to do the work that PEMCO/AAI had performed since 1969.
Boeing had all of PEMCO’s proprietary pricing data and methodology from the preparation of the joint bid that the two companies had worked on together in early 2006. PEMCO however had never been given access to Boeing’s plans, data, and methodology. PEMCO/AAI alleges that this inside information gave Boeing an unfair advantage in the bid for the 2008 KC-135 PDM contract with the U.S. Air Force.
On September 18, 2006 both PEMCO and Boeing each submitted separate bids on the contract. On February 23, 2007, both companies submitted their Final Proposal Revisions (FPRs) for the contract. Boeing reduced its estimate of labor hours per aircraft substantially. The Boeing Company never submitted any technical justification for the last minute changes in the bid. PEMCO/AAI alleges that the changes were based on the use of PEMCO’s proprietary information, not on any new labor saving methodology.
The USAF procurement officer overseeing the bid process was Ronald Poussard. Mr. Poussard had overseen the KC-135 PDM work for many years and was very familiar with the work done by both Boeing and PEMCO. In May 2007, with award of the contract pending by the USAF Ronald Poussard was replaced without explanation. Charles Riechers was made the SSA responsible for making the contract award. Riechers had been an Air Force officer and had spent the last four years of his Air Force career assigned to “concept” projects at the Pentagon, but had never worked in procurement before and had little knowledge of or experience with tanker aircraft. From November 2006 to January 2007 he worked as an advisor for Commonwealth Research Institute (CRI) making $13,400 a month at the secret request of the Air Force. Instead of doing work for CRI (a defense contractor and Boeing client) Riechers was actually working for Sue C. Payton, assistant Air Force secretary for acquisition, on projects that had nothing to do with CRI. CRI was registered with the IRS as a nonprofit, but it was also one of the 200 largest Defense Contractors at the time. Joseph Ryan, Trustee for the Litigation Trust said, “He (Riechers) came to work as a procurement officer from his job in a think tank (CRI) that was heavily funded by Boeing. Then he came in as an inexperienced procurement officer.”
On September 7, 2007, the USAF accepted Boeing’s revised bid on the recommendation of USAF Principal Deputy Assistant for Acquisition Charles Riechers. The USAF found that PEMCO was as well qualified as Boeing, and had a better performance record than Boeing. Boeing however was awarded the contract because its total bid price was $15 million less than PEMCO/AAIs. The difference was just 1.3% over the long potential life of the contract. PEMCO had submitted a bid of $1.18 billion and Boeing had submitted a bid of $1.165 billion. PEMCO alleges that Boeing low balled the bid using proprietary information taken from PEMCO during the preparation of the 2006 joint bid. PEMCO also alleges that Boeing at the last minute in the bid process used its proprietary knowledge of PEMCO’s proprietary information about pricing and methodology to submit a bid that was very slightly lower than PEMCO’s.
On September 14th during the official debriefing by the Air Force to PEMCO as to why the contract was not awarded to them PEMCO inquired as the removal of Mr. Poussard as the SSA in charge of awarding the contract at the last minute and asked to know why the Air Force had not investigated PEMCO’s allegations that Boeing had converted and misused proprietary information belonging to PEMCO in the bid process.
Following the controversial bid award to The Boeing Company, Charles Riechers became the subject of a General Accounting Office (GAO) investigation about his role in and his previous employment with CRI. CRI’s parent corporation Concurrent Technologies Corporation was a large Boeing client. On October 1, 2007, Riechers, told the Washington Post, that all he did at CRI was attend the Christmas Party where he met the corporate executives for the first time. “I really didn’t do anything for CRI,” Riechers said in the Post interview. “I got a paycheck from them.” On October 14, 2007 as the scandal was breaking in the press and with a GAO investigation focusing on his possible misconduct, Charles Riechers went in his garage, got in his car, turned his ignition, and committed suicide by carbon monoxide poisoning.
Ryan said, “As you know, he (Riechers) ultimately committed suicide leaving a note apologizing for creating another scandal. There was an investigation that was initiated in 2008 in respect to not only the suicide but also the alleged note. We have made every effort to find it, but the Washington Post reported on the content of the note at the time of the suicide. Nobody has any idea what the results of that investigation are. It could well be ongoing but we just don’t know. It is quite a conundrum, I can tell you that.” In the suicide note Charles Riechers addressed to his boss, USAF Acquisition Chief Sue Payton, he expressed remorse for having creating a new acquisition scandal. Ironically this acquisition scandal and the one centered around USAF procurement officer Darleen Druyun both involved The Boeing Company.
On December 7, 2007 the GAO agreed with PEMCO and issued a decision that the USAF had failed to perform an adequate price realism evaluation of the Boeing bid. The revised Boeing bid is a “cost plus” bid which in theory could actually end up being more than the PEMCO bid of $1.18 billion. On January 7, 2008 the USAF requested that the GAO reconsider its decision to sustain PEMCO’s protest of the contract award. On February 1, 2008 the GAO denied the USAF request. On March 3, 2008 the USAF notified PEMCO that they had again awarded the contract to The Boeing Company. The Boeing Company bid was $1,165,138,187 versus the PEMCO/AAI bid of $1,180,186,789.
On March 11-13 2008 PEMCO attended a Program Management Review (PMR) about the KC-135 PDM program. At that meeting, the USAF said that they were having problems doing their in-house PDM work. Whereas 44 planes a year had been going to Boeing and PEMCO for Programmed Depot Maintenance, the USAF had been also doing PDM work on a certain number of planes in house. Since the Air Force was having difficulty doing that work itself those planes likely would be sent to Boeing in the future. Thus the 2008 KC-135 PDM contract would likely be for more than the 24 planes a year that PEMCO had been led to believe. The reduction in the number of planes was the justification by Boeing for ending the MOA agreement in 2006.
In July 2007, Boeing agreed to repay more than $1 million it had overbilled the government from 1998 to 2003 to install new engines in KC-135 Stratotankers. On August 11, 2009, Boeing agreed to repay the government $2 million for false claims of KC-135 work that it had done from 2002 to 2006 at its San Antonio facility. On August 13, 2009 Boeing agreed to settle another federal lawsuit for $25 million, this time involving overcharges and defective work on the KC-10 aerial tankers. This work was also done at Boeing’s much criticized San Antonio facility, where all the KC-135 PDM work is now being performed.
In May 2006 the Department of Defense Inspector General found that disgraced USAF procurement officer Darleen Druyun had wrongly rushed the USAF to settle a $119 million Request for Equitable Adjustment (REA) in favor of Boeing for $35.8 million on the 1998 KC-135 PDM contract. Boeing’s poor work and questionable billing practices were why USAF procurement officer Ronald Poussard had recommended to the Air Force that they end the 1998 KC-135 PDM contract and rebid it in the first place with the 2008 KC-135 PDM contract, which is in force to this day. It is AAI’s assertion that The Boeing Company has a history of low balling bids to get defense contracts and then either coming back with an REA saying they need more money for the work or fraudulently adding costs to a cost plus work so that even when Boeing is the low bidder the actual price paid by the government is often more than what was supposedly bid.
Former AAI Chairman Harold T. Bowling said, “If you go back to the original contract award that we talked about earlier, they (Boeing) bid it in a way that they couldn’t perform, so when they began to have the extraordinary costs that they probably knew they were going to have made, they knew that they could go back to the government and ask for this request for equitable adjustment and recover their costs. That has been their pattern throughout all of their contracting history and I think it was their strategy, their tactic, knowing that Alabama Aircraft had a lower price potential based on having lower overhead and the business situation that we had in Birmingham. They couldn’t meet that, but they went ahead and did it anyhow, knowing what our prices were going to be, thinking that from the business view standpoint they would go back and try to recover it as they have in other cases.”
Trustee Joe Ryan said, “There is a pattern and practice here for Boeing asking for requests for equitable adjustments. They did it with Druyun. In about 2000 she awarded them about $35.8 million which the Defense Department found to later be excessive and undeserved, but so what. There is a pattern here of Boeing coming in on a contract, bidding X. For example, the contract they won by underbidding by 1.5 percent on a $1.3 billion contract and that was done with Mr. Riechers. And then coming in with requests for equitable adjustments which would essentially make up for the amounts they underbid or by the amounts by which they underbid us in order to get the contract.”
After losing the 2008, bid on the KC-135 Stratotanker PDM contract to Boeing, AAI agreed to continue to do some of the KC-135 PDM work for Boeing. Under the ongoing bridge contact AAI/formerly PEMCO agreed to do PDM work on up to ten KC-135s per year for Boeing. AAI agreed to do the work for Boeing at the price of $6 million per airplane. On March 17, 2008 Boeing wrote AAI saying that the USAF only had $26 million to spend on the PDM work and that AAI had just 24 hours to agree to the new pricing of $3.25 million per plane. AAI wrote back to Boeing reluctantly agreeing to the new pricing. AAI later learned that Boeing was actually charging the USAF $4,769,460 per plane. These facts were concealed by Boeing. During this six month bridge contract, AAI contends that Boeing continued to delay parts and materials to AAI costing the Alabama Company “delivery fee awards” under these contracts.
In 2008, AAI reported only $53.5 million in revenue and a loss of $5.8 million. In August 2010, the company reported a loss of just $21,000; but revenues had plummeted to just $11 million. The loss of the KC-135 business (over 90% of AAI’s total business) was devastating. Every KC-135 Stratotanker in the USAF fleet had been through Hayes/PEMCO/AAI’s hangers at least once. Without the KC-135 work, the company could not meet it long term pension obligations to its employees. On February 15, 2011 the company filed bankruptcy. A bond fund affiliated with Michael Tennenbaum’s Tennenbaum Capital Partners was also owed $2.5 billion by Alabama Aircraft at the time of the bankruptcy.
Kaiser Holding Company bought some AAI assets and contracts out of bankruptcy in September 2011. The court approved the Section 363 sale over the objections of The Boeing Company. AAI officials assert that if Boeing had been a better joint venture partner there would never have been a bankruptcy. A week later, AAI filed suit against Boeing. The AAI filing said that, “Boeing was throughout this relevant time period a lawbreaker and chiseler of the government and its business partner and engaged in patterns of misconduct.”
Today the massive Hayes/PEMCO hanger sits largely empty. Salesmen are struggling to find contracts for the company to do. At the time of our interview last month, Chairman Bowling said that there were one C130 transport and some helicopters receiving maintenance. Where once 1,600 skilled Alabama workers drew a union wage, there are now just 50. The company is looking for P3 Orions, C-130s, helicopters, and other military work that it can perform at Birmingham. Trustee Ryan said, “The principals of Kaiser have every intention of having Kaiser Aircraft operate in the future as a viable defense contractor in the Birmingham area. They want to add employees. They want to get planes in those hangers. They did not buy it out of the bankruptcy simply to have a series of causes of action against Boeing or whomever. They bought it to run a business and it so happened, that they had these claims as well but this is not a liquidation proceeding. Kaiser is in business to maintain aircraft.” AAI is asking the court for a $100 million in damages for Boeing’s pattern of misconduct against the small Alabama company. Boeing has asked that this case be dismissed. Judge David Proctor has set a hearing on whether or not to grant Boeing’s request to dismiss for May 23 in Jefferson County.
There are allegations in the article that are taken wholly from the complaint filed by AAI and do not necessarily reflect the opinions of the author or publisher.
Governor meets with VIP
Alabama Governor Kay Ivey invited a special guest to meet with her in the Governor’s office on Friday.
Fourth grade student Cate McGriff met with Governor Ivey Friday afternoon. The discussion was described as wide-ranging and productive. The governor and McGriff covered everything from school to their love of dogs.
Gov. Ivey asked Miss. McGriff what her favorite subject in school is.
McGriff replied that it was math. She also told the governor that she wanted to attend Auburn University just like Gov. Ivey did.
Ivey asked Cate what she wanted to be when she grows up, after she attends Auburn.
McGriff said that she wanted to be an engineer.
Ivey advised her to keep working hard on her math.
Ivey shared that when she was a young intern for Governor Lurleen Wallace, the only other woman to serve as Governor in Alabama history, she had the opportunity to sit behind the governor’s desk. Ivey then asked Cate if she wanted to sit behind the desk, and they recreated the governor’s own photo behind Governor Wallace’s desk.
Cate and Governor Ivey both were wearing their red power suits and Auburn masks.
McGriff was joined by her parents and two siblings, Claire and Sam.
The McGriff family frequently tune in to the governor’s regular COVID press conferences. Cate also was given the chance to stand behind the lectern in the Old House Chamber.
Governors frequently meet with very important people including: Presidents, CEOs, congressmen, Senators, scientists, University presidents, state legislators, county commissioners, economic developers, and fourth graders.
CDC issues Halloween guidance
Today is Halloween. Many people are celebrating this year’s holiday at home as a nuclear family due to the coronavirus global pandemic. If you are going to still trick or treat this year, the Centers for Disease Control and Prevention have issued guidance on trick or treating.
“Traditional Halloween activities are fun, but some can increase the risk of getting or spreading COVID-19 or influenza,” the CDC warned. “Plan alternate ways to participate in Halloween.”
To make trick-or-treating safer: avoid direct contact with trick-or-treaters, give out treats outdoors, if possible, set up a station with individually bagged treats for kids to take, wash your hands before handling treats, wear a mask or cloth face covering.
The CDC has also issued guidance on proper mask wearing. Make your cloth mask part of your costume. A costume mask is not a substitute for a cloth mask. Do NOT wear a costume mask over a cloth mask. It can make breathing more difficult. Masks should NOT be worn by children under the age of two or anyone who has trouble breathing.
Remember to always stay at least six feet away from others who do not live with you. Indoors and outdoors, you are more likely to get or spread COVID-19 when you are in close contact with others for a long time.
Don’t let excitement about the holiday distract you from proper COVID-19 procedures. Wash your hands. Bring hand sanitizer with you and use it after touching objects or other people. Use hand sanitizer with at least 60 percent alcohol. Parents should supervise young children using hand sanitizer. Wash hands with soap and water for at least 20 seconds when you get home and before you eat any treats.
Other suggestions for enjoying Halloween activities during the global COVID-19 pandemic include: decorating and carving pumpkins, decorate your home for Halloween, and you can walk from house to house, admiring Halloween decorations at a distance. You could also visit an orchard, forest, or corn maze. You can also go on an outdoor Halloween-themed scavenger hunt. Visit a pumpkin patch or orchard. Whatever you do or wherever you go be sure to remember to wash your hands or use hand sanitizer frequently, especially after touching frequently touched surfaces, pumpkins, or apples.
The CDC also suggested that you can hide Halloween treats in and around your house and hold a Halloween treat hunt with household members. The CDC suggested that you can hold an outdoor costume parade or contest so everyone can show off their costumes. Another suggestion is that you host an outdoor Halloween movie night with friends or neighbors or an indoor movie night with just your household members.
Etowah County Republicans rally for Trump
The Etowah County Republican Party and the Trump campaign will be holding a Celebrate America rally and prayer meeting on Sunday in anticipation of Tuesday’s general election.
“We the People plan to peacefully assemble at our town square Tomorrow, November 1st at 2:00 PM to rally around President Trump and pray for our nation, our first responders, and for our President,” organizers said.
Remarks will be made by special guest Congressman Robert Aderholt, R-Haleyville.
Singer songwriters Camille and Haley will perform.
Pastors Mark Gidley, Joey Jones and Bruce Word will be speaking.
“Bring your friends and family as we pray, celebrate and rally for America!” organizers said. “Our outdoor program and rally will be an amazing hour that you will not want to miss! Please mark your calendars and please share.”
Patriotic attire, American flags, and Trump flags are welcome. The event will be in the Rainbow City Town hall parking lot.
Robert Aderholt is in his twelfth term representing Alabama’s Fourth Congressional District. Alabama’s Fourth Congressional District is where Trump had his greatest margin of victory in the entire country in 2016.
President Trump and Congressman Aderholt both face Democratic challengers in Tuesday’s general election.
Jones says Senate race a choice between “substance and leadership, and nothing”
“One of the great disappointments in this campaign is that Alabama is not really getting choices between substance and substance,” Jones said.
Speaking outside the Calhoun County Democratic Party headquarters in Anniston on Friday, Sen. Doug Jones, D-Alabama, told a group of supporters that Alabamians haven’t gotten a look at what his Republican opponent might do if he wins the Nov. 3 election.
“One of the great disappointments in this campaign is that Alabama is not really getting choices between substance and substance,” Jones said. “They’re getting a choice between substance and leadership, and nothing — nothing. We have not heard anything from Tommy Tuberville about what he really wants to do.”
While Jones has held numerous interviews with the media, and regular web briefings over the summer and in recent weeks, Tuberville’s campaign seems to prefer the safety of keeping Tuberville from making possible gaffs or damaging statements in interviews.
Tuberville hasn’t agreed to interviews with traditional media outlets, or to debate Jones, and instead has focused on conservative talk radio spots, speaking to smaller Republican groups and at private parties.
Tuberville’s campaign has ignored or denied our numerous attempts to interview Tuberville, including another request on Friday. He also declined to attend a student forum held at Auburn University on Wednesday, which Jones attended. The forum was sponsored by the Auburn College Republicans and College Democrats.
“If you ever hear something Tommy Tuberville says, it is just simply this: ‘Build a wall. No amnesty. Drain the swamp.’ That ain’t him. That’s Donald Trump,” Jones said. “He cannot think for himself. He doesn’t think for himself.”
Jones spoke of his record of working to help veterans through legislation. And he referred to Tuberville’s nonprofit for veterans and reporting that indicates, through tax records, that less than a third of the money raised for Tuberville’s charity went to help veterans.
“I don’t just create charities and send only pennies on the dollar. I do things for the veterans of this state and this country,” Jones said.
Jones also made a case for Alabamians to remember the contributions past Democrats made in the state. Jones said it was Democratic Sen. John Sparkman who helped build Alabama’s Redstone Arsenal.
“It was a Democrat, Lester Hill, who built the rural hospitals around here that Donald Trump and Mitch McConnell and Tommy Tuberville are trying to destroy,” Jones said. “It was Howell Heflin who built up agriculture in this state. Those are the Democrats. It was Franklin Rosevelt that put electricity in this state. We’re going to do the same thing for broadband. People forget those things. They forget those things because we’ve let other people define us with lies.”
Jones plans to visit Jefferson County on Saturday, then on to the Black Belt and Mobile on Sunday with another stop in Birmingham on Monday afternoon.
“The goal is to get everybody out. That’s the thing if we want to continue to ensure Alabama moves forward — moves forward and not backwards, to continue to have somebody, if I do say so myself, somebody that’s just not going to damn embarrass us,” Jones said.
“We’ve had too much of that in Alabama,” Jones said, “and I bet you it won’t be a year that Tommy Tuberville would be an embarrassment to this state because he doesn’t know the issues. He doesn’t know what to do, and he’s dang sure not going to know what to do when Donald Trump is not president of the United States.”
Jones encouraged supporters to be skeptical of recent polling. One such recent poll, by Auburn University at Montgomery, puts Tuberville ahead of Jones by 12 percentage points, 54 to 42.1. An internal poll by Tuberville’s campaign puts Tuberville ahead by 15 percentage points, while an internal poll from the Jones camp put Jones ahead by one percentage point.
“Don’t listen to these polling folks that come in, and they don’t know Alabama, and they don’t know what they’re doing. We’re tracking this race, and I can tell you, everything has been moving in our direction the last two months,” Jones said.
People standing along roadsides holding his signs and showing support, Jones said, is “the energy we’ve got out there. That’s what you can’t poll.”
Ellen Bass of Anniston, standing outside the Calhoun County Democratic Party headquarters just after Jones spoke, told APR that she has numerous Republican friends who are voting for Jones.
“My hat’s off to them because they’re coming out,” Bass said. “They recognize that he is a better candidate.”
Ciara Smith, 21, newly elected to the Anniston City Council, told APR outside the headquarters building that Jones is the better candidate.
“I think that he’s educated. I think that he speaks with passion and heart,” Smith said. “And he knows what he’s talking about, which is important, and which is more than we can say about the other candidate.”
Speaking to APR after his speech to supporters, Jones said that he feels very good about the state of his campaign.
“Everything we’re seeing is moving in our direction,” Jones said. “And the more he stays hidden, the better it is for us.”