new major innovation tends to be depended on energy. we all marvel at the high-tech revolution of the 1990s and cents, but that revolution is largely driven by electricity, the electricity to manufacture the chips and components of the computers, the electricity needed to operate laptops and pcs. ..

>> the new america be foundation's william hartung presents the history of the country's largest military contractor, lockheed martin. the former directer of the arms trade resource center at the new school's world policy institute argues that the company's financial success and government influence is significantly greater than publicly known. the author of "and weapons for all," discusses lockheed martin's reach into the lives of ordinary americans with the father of the a-10 fighter jet, pierre sprey. >> host: bill, i'm very excited about this book. you're writing about stuff that i've lived through, and ever since 1966 i've been involved in one way or another with lockheed projects of one kind or another in my role working for the government and after that for military reform. this was a subject about which i thought i knew a fair amount. your book has, you know, brought

in a whole, a whole level of history and detail that i didn't know about that's both exciting and timely. this book is extremely timely. that's the main reason i'm excited about it. we've just had two years of sering revelations about how big banks, big financial houses have spent 30 years unraveling the structure of regulation that was set up in the '30s to prevent another depression from ever happening. and they used their money and their influence and their campaign contributions and their lobbyists and their people for 30 years relentlessly to unbutton this structure to allow them to merge into larger and larger or corporations, kill more and more competition, redo the regulations that were set in place to keep them from gambling with our money. and they did so with great

success. and the upshot was that the incompetence and the greed of their executives wrecked our economy. and we're living with the aftermath, and it looks like the aftermath is more of the same. the taxpayers' money has been continued to be used to pay their bonuses and to allow them to keep on gambling with our money. i think the parallels of that with the story you've put together are amazing. i think your book has echoes of all of that on the defense side. and we have the same themes. we have the themes of, you know, how much influence do these corporations have on the government, how much have they worked to allow themselves to allow things to happen so that they could merge and kill competition, how much have they used their lobbyists and campaign money and is -- and so

on to affect whether we fight wars or not. and lastly, of course, the large question, have they hurt or helped national defense? i think your book bears on all of that, gives fascinating detail. and the right way to do it, which is to go into detail on what's more or less the largest of all these defense mega corporations, kind of the poster child for the whole military industrial complex. and your book by delving into very fine historical details, i think, is, sheds light for anybody who's interested in this summit, and it's -- subject, and it's, of course, weighing very heavily on everybody in washington because for the first time in a long time, the defense budget is under assault. so i think you have lots of stuff to tell people that is new and fascinating, and why don't

we start with just the origins, you know, the modern lockheed as we knew it started back in the '30s with a bankrupt company, and you tell a story i've never heard about about what bought it. >> guest: well with; even before that you -- well, even before a that you had two brothers who got tired of being called lughead, so they spelled it in the modern way that's the name of the company. and they were working initially out of a garage in san francisco. and they did build a successful plane that they could fly over the bay and land, and they were taking people for sort of joyrides for $5 and $10 each. they had their ups and downs. they actually sort of missed world war i, they didn't produce anything that was useful for the war, and they were up against it

several times before they became a going concern. malcolm, one of the brothers, said, you know, enough already. i can't handle -- my nerves can't take this. [laughter] so he went into the auto industry, created the hydraulic brake system which became standard and said, you know, you're on your own, alan, i'm out of this business. so they went out of business after the war. they got some investors, alan did, and started again as the lockheed aircraft corporation in the mid '20s. and that also, well, it had some moments. i developed a plane that was airworthy, they were selling some, but then the detroit aircraft corporation which was funded by the automakers decided to buy lockheed. they saw promise there. they were going to be the general motors of the air, as they called themselves. and so in comes robert gross, a businessman from the east. knows nothing about aircraft -- >> host: and a key figure in all this because he continued to run

lockheed, i think, deep into the '60s if not into the '70s. >> guest: yeah, early '60s. but really set the pattern for a lot of what came later. >> host: absolutely. this is a very key figure. and his character and what he was interested in sets the tone for the whole subsequent history of lockheed and lockheed martin. >> guest: so he was a businessman. i think he thought this would be a fun thing to do, and he got it cheap. i mean, it was in bankruptcy. it was his group versus, basically, a salvage company. >> host: he was a young millionaire from wall street, right? >> guest: yes. >> host: didn't know a thing about airplanes. >> guest: exactly. but he felt like he knew about business. this seems to be, you know, he could sort of rescue i this company. and he said, you know, as long as i don't have to put much money into it, where's the downside? he wrote to his brother saying, you know, if we get this thing going, you can be our eastern representative, you know, the whole family can do well out of this.

but the '30s were tough for them. they did build the electrowhich had some sales to airlines and so forth, but at a certain point he had said, well, you know, i prefer not to sell to the government. there's too much politics. too much light and shadow. i don't want to get involved in all of that. but by the mid '30s the government started to look pretty good. [laughter] they tried to sell early on to the postal service, but the postmaster general didn't like their planes. said, you know, they fly too fast, they're going to be dangerous, you know, we're going to be crashing with the mail. but anyway, they said, well, you know, he said, well, i'm going to have to start selling war machines. there's no option. i can't start my own airlines, this is where the money's going to be. so he began to sell to the government. and then his first big deal was with the british. >> host: yeah, and can that was particularly interesting to me. he'd already made some small attempts to sell to the germans and the japanese, so this wasn't

exactly a patriotic enterprise. and all in violation of the neutrality act at the time. so that kind of set the pattern for a lot of what lockheed did later. so they were already violating the law, trying to sneak military airplanes out of the country in order to make some money. >> guest: they actually had a plant on the canadian border. they would build them and then drag them across as if it was an export to canada. and then from there they would go to the u.k. >> host: again, totally illegal, in violation of the neutrality act because great britain was belligerent. but with their first big customers, as you said, they saved lockheed. >> guest: and they went from being this struggling enterprise to the biggest company in the industry. and that, there were continued sales to the british. >> host: yeah. and by the way, the airplane they sold the british was a perfectly ip competent bomber. it was a bomb wither version of their little electra.

they actually managed to sell 1700 to the british, and they were such dog meat for the german fighters that for the rest of the war the british just gave them maritime patrol duties and stuff like that. a few engagements they got into they got rip today shreds. so it wasn't with like they did the british a big favor. [laughter] >> guest: although at the time, you know, in discussing it with the british officials, you know, gross said, well, you know, it's going to be tough. we think we can do it. we'll recruit some subcontractors and, of course, it's going to cost a little more, but, you know, we'll give all our resources to you. as if it were some sort of humanitarian gesture that they were carrying out. so it was very interesting. >> host: and, of course, they didn't give all their resources because they went to work very quickly on a two-engine fighter called the p-38 lightning which was a disaster which proved to be so vulnerable to messer

schmidts that it was the only airplane that i know of that air force generals actually asked to have remove prd the theater. they had them removed from the german, from the bombing of germany because they were getting torn up so bad due to sluggish roll rate and very, very flammable airplane. and so they got yanked out of the german theater, got sent to peripheral theaters. but they managed to sell the government 10,000 of those. >> guest: yes. >> host: way i don't -- way beyond what they sold the british. >> guest: so from a business point of view gross was doing quite well. >> host: with bad airplanes. i don't think it made any difference to him whether they were good or bad. >> guest: early on jack northrup designed things, and once he left, they really seemed to flounder in terms of getting decent designs. >> host: they had kelly johnson who made a huge name for

himself, but it was all on fluff, on bravado and self-promotion. kelly johnson was own -- one of the designers of the p-38. he stayed on and had something to do with the skunk works. >> guest: he looked like w.c. fields without the sense of humor. >> host: i knew him. he tried to convince me of the enormous merit of their airplanes. in fact, he took me around the sr-71 hangar and gave me a whole bunch of whoo by about how invisible it was to radar that turned out to be total lies. but that's the way he built, built a great reputation. >> guest: so they come to the end of the war, and suddenly they're in a position where pretty much anything they built was going to be purchased as we've seen. and gross in correspondence says, well, you know, i've never

seen something anything like those short, appalling weeks. so it wasn't the war that was appalling, it was the end of the production. >> host: the war and the end of the huge flow of money. >> guest: so the gravy train was shutting down. and he decided, well, you know, we have to find some way to get back on a higher plain in terms of aircraft purchases by the government. so they were pushing for to have an air policy board that would sort of make a case for aircraft as part of national defense, as, you know, having it funded at higher levels. >> host: this was an industry board to advise the government. >> guest: essentially. i mean, there were testimony taken from 150 individuals, and none of them had anything other than a stake in the aircraft industry either from the military or the industry. i think they had one correspondent from "the new york times" who was kind of an aviation nut. >> host: we've had 50 of those aboard since then. that set a pattern. that was a very successful

pattern for, basically, sub oning government into pouring more money into aircraft whether it needed them or not. >> guest: and gross was very sort of emphatic that we needed this kind of public interest, kind of, you know, people who were above the fray. and, of course, you got the exact opposite. and there was a congressal board and then -- congressional board and then truman appointed the thin letter commission which said, well, you know, we need more aircraft, and we should up military spending -- >> host: and, of course, thin letter was a total shell for the industry in the first place which was why truman appointed him. there's another side story, very important side story which was lockheed and the other contractors were so desperate because they knew they would go bankrupt if the defense budget shrank the way it traditionally did after every war to where we just had a garrison army and air

force during peacetime until we needed it for war again. they were terrified if that happened, they'd all go bankrupt. they put together a very big slush fund through the aircraft industry association in order to create a new threat. and with great successes with '47, '48. with great success, they used that money to create, basically, the origins of the cold war. they created a soviet threat that didn't exist. they created the idea that the soviet group onwas just -- soviet union was just waiting to pounce on all of europe. the soviet union was flat on its back, of course, could hardly feed itself and could hardly feed the satellite countries it had taken over. wasn't a chance they were going to pour across germany and france. but this aircraft industry fund actually created the propaganda and the atmosphere that started

the cold war. this is very well documented in a book called truman and the war scare of 1948. and they directly contributed, by the way, to truman's campaign fund. so lockheed and the other principle companies, you know, started that pattern of putting lots of money behind a president because truman was about to be defeated by dewey, and dewey had more money. dewey was the republican, and at that point truman reined in his secretary of defense, louis johnson, said we're building up, we're not shrinking the budget, and everything turned around. the budget started to expand, and bob gross and the other presidents gave a breath of relief. of course, which was turned into glee when they managed to get the korean war started which was the war more than any other war that was fought to simply bail out the defense budget. that was, that war was the real

making of the peacetime lockheed because huge budgets were made available, none of which were spent on our troops in korea. our troops in korea were still getting frostbite due to inadequate boots and ammunition supply. and meanwhile, this huge new budget is being used to fund nuclear bombers and, for lockheed, cargo airplanes. they got the c-31 started since they bombed out in fighters. >> guest: still variations today. >> host: it's a world record. they started that thing in 1951, it's still in production in the year 2010. outrageous prices, you know? it's a four-engine, you know, moderate-soized transport, supposed to go into the front lines but not super capable of going into really rough fields although better than anything else we have for that purpose. it was my first job in the pentagon.

when i arrived in the pentagon in 1966 was to look over the c-130 mess that we had inherited from that start in the korean war. we were loaded up with over 1500 c-130s that we absolutely didn't need. just, you know, to keep on buying lockheed products that had gone on all the way through first truman, then eisenhower, and on into kennedy. >> guest: yes. >> host: and secretary of defense -- >> guest: even recently. i mean, congress would add every year many more than the pentagon -- >> host: exactly. in be '66 i did a study for the secretary of defense that said we've got far more than we need. we need to fix up the ones we've got so they really can land on fields, we have too many. shut down the production hine and really do something for the troops with the ones we have left. he accepted that proposal. he got totally skunked in the congress because lockheed's lobbyists were there in

congress, as they are today. i mean, today even the air force lobbies against this airplane. they don't want it. it's just a waste of money, and every year a few more sneak into the budget today. that airplane when i arrived in '66 in today's dollars was costing about $15 million. it's now up to $100 million or more. you know, in today's dollars. they've so gold-plaited it -- >> guest: nice work. >> host: yeah. but this is the picture of what bob gross started, you know, with the help of the aircraft industry association. and, of course, he wasn't the only one. the president of boeing and grumman were all doing the same. >> guest: and we also see the beginning of the revolving door with oliver ec les who went to head the aircraft association. he'd been head of procurement of the army during the war. of course o, he was now on the industry side making money from it as opposed to the government

side supposed on the overseeing it. and he used those connections to help advance the interests of the industry which we see, you know, up to the moment. we saw it in the '80s, the '90s and, you know, it's very current, that kind of technique for influence. >> host: yeah. no, bob gross was a real, a real trend setter in influencing the government from, from before world war ii days. and after world war ii, of course, he became a trend setter, notorious in the aircraft industry, for being more ready to bribe, you know, foreign defense ministers and even prime ministers, you know? he got, he got lockheed deep into the international bribery business and finally wound up, as you recounted in a horrible scandal in japan. >> guest: yes. >> host: tell that story. >> guest: it's interesting because it didn't come to light

until the '70s. but already in the late '50s they were using their influence in japan first to sell the f-104 which went on to call all kinds of problems, was called the widow maker in the germany because it crashed so many times -- >> host: and that was sold under very crooked circumstances, and had gotten to him, and he became a huge defender of that widow maker. a terrible, terrible fighter. it was their last fighter and 0 just, you know, far worse even than the p-38. >> guest: and so in japan they end up hooking up with an organized crime figure who also had been imprisoned as a war criminal right after world war ii. so this was a very unsavory character, but he also helped found the liberal democratic party in japan, so he had credible connections. he knew the head of the air lines, military people. he was their conduit, you know,

to the japanese government. >> host: right. they found guys like that in every country where they were trying to do business. they found that guy in japan, of course, they found prince bern hart in europe, they found a guy for the near east. these were notorious international arms agents which is kind of synonymous with briber and corrupter. >> guest: and you know the lockheed people like to call them commissions. they don't like to call them bribes. >> host: of course not. >> guest: you know, occasionally they would call it a kickback because their lawyer said, well, that's a better term than a bribe. but, yet, people like the prince who had unbelievable connections. i mean, not only was he associated with the air force, but he was -- every organization you could think of in hold land, he was part of it. -- holland. he also had a soft side. he was part of the world wildlife fund, so he had this whole image as a good citizen at

the same time that he was taking these commissions and actually asking for more. >> host: and we're talking about millions here. 're not talking about, you know -- we're not talking about, you know, 50,000 or $100,000 here and there. we're talking about millions involved in these so-called commissions which, of course, were really bribes intended for various government officials that the prince had connections with or that the japanese gangster had connections with. >> guest: although eventually bern hard decided to work for northrup. so he was playing both size of the street. >> host: well, in that sense bob gross was a pioneer. northrup jumped in very quickly behind him. president tom jones of northrup happily engaged the same agents, not just the prince, but also kashogi for the near east. same unsavory people, same unsavory practices. >> guest: and in saudi arabia there was enough money they

could split the business and still do very, very well. and kashogi they had some issues with because they could never figure out was the money ending up with the people -- >> host: that's always the problem with agents. you never know. you know, because you're busy laundering money to look like you're legitimately paying an agent, and then you can't be on top of it. you can't have your accountants on top of him to make sure he pays the checks because then you're implicated. they have to try to keep that arm's length distance. >> guest: yep. >> host: of course, that other part of the whole bribery business is that the officials, the chairman of the aircraft company that's paying the money usually gets a cut too. and that's what keeps -- this is a very, very cozy system that's profitable for everybody including the people offering the bribe money. they may complain it's expensive, but they're keeping part of it. >> guest: once you take it out of any kind of public scrutiny, all bets are off.

>> host: in almost every case of that kind of arms bribery that's been really well investigated, the person was putting up the original bribe from the american company was also benefiting. so you can just kind of count on the fact that there was this feedback going on and that bob gross when he went to japan to try to bribe, you know, the prime minister of japan with not just looking to sell airplanes, he was also looking to do well for himself. exactly the same problem as the outrageous executive compensation of the mega banks. same problem. >> guest: yeah. well, they asked daniel horton who was the head of the company in the '70s, aren't you concerned? do you know where this money's going? he said, well, not really. i mean, i give it to the agents, and i get the sale. that's all i care about, you know? i mean, it must work. i pay the guy, and i get is sale. >> host: as the other party's not mentioning, the last part, i get some too.

[laughter] >> guest: you know, so they really sort of pioneered this in the '50s, but then in the '70s they had a whole other round of it because they were on the verge of bankruptcy. and they desperately thesed to sell the l-1011 airliner which they had put a lot of money into, weren't getting a lot of sales, and they were afraid they were going to sink the company. so they went through the whole routine again in japan. they even had a per-head, you know, you've got to pay the prime minister 1.7 million, but then this other guy needs 1.7 million, this level of minister needs 200,000. and, you know, the guy who did this for lockheed was so proud of it he wrote a book, "70 days over tokyo," which was, you know, basically about his bribery mission. [laughter] and to the end he never admitted it was wrong. he said, you know, it's like nixon. everybody else did what nixon did, and then suddenly they change the rules. you know, if i can get business for my company by spending a

little money, why wouldn't i do that? i'm a businessman. there wasn't any kind of learning curve as to is there any moral issue here. it was just, you know, might we get caught? which is one thing gross brought up early on which was, well, you know, depending on how much and how we do it, is there going to be any action against us where, you know, some of this money will be recovered. so already early on he's trying to figure out, you know, can we cover our tracks here? not can we do it, but how do we do it? >> host: right. >> guest: they had wonderful correspondence with one of their indonesian reps where they said, you know, we're giving him $100,000 per plane and not a dollar more. i'm going to stand on principle here. we'll bribe this far and no further. [laughter] and finally indonesian air force said we don't want a middleman. we want the money straight up, is just give it to us. and then the lockheed people were saying i don't know if we can write this off on our taxes

if we don't use a middleman. [laughter] so it was about how far can you push it. and, of course, the bribery rules weren't as strict back then. >> host: they're not real strict now. and by the way with, the u.s. government was completely complicit in this stuff, totally aware of it, you know? even later when i was working on exactly the same problems with respect to iran in the pentagon, there were major u.s. officials up to three-star generals who were completely aware of all this bribery and supporting it, helping it to happen. >> guest: there's the -- 0 >> host: some of them had to resign under peculiar and sudden circumstances. [laughter] >> guest: there was a situation with kashogi where he tried to explain it to folks in the pentagon. and by the time he got done spinning it they were saying, oh, this is kind of like an economic development program. we give it to him, he spreads the money around, and it's an

inexpensive way to do it. better than straight foreign aid and, by the way, we'll get some other money out of the deal, so how bad could it be? >> host: yeah. of why don't you move forward from bob gross', you know, seminal role in teaching the industry how to really influence governments, foreign and our own, to the next genius of that, of that art, norm augustine, who was the next kind of charismatic president of lockheed a few years later. >> guest: well, he was an impressive guy, you know? i mean, he was sort of like the renaissance man of the defense industry. he wrote this famous book, "augustine's rules," which everybody liked to quote. >> host: yeah. by the way, very much in the mold of bob gross except in some ways slicker. didn't know a thing about airplanes. i knew norm augustine, and his rules are just kind of shallow, almost like rumsfeld's little motto of, you know, they look

shallow truisms. >> guest: fun sayings. >> host: everything's getting more expensive. but what he really knew about airplanes you could put in a thimble. but that wasn't his job. his job was to influence the government at very high levels to allow lockheed or the industry -- at that point he wasn't associated with lockheed -- to allow the industry to, first of all, get more and more money, keep the defense budget high. and then when the defense budget started shrinking, to start creating megacorporations to kill off competition, i should say. >> guest: yes, and he -- >> host: he was amazingly effective at doing that, and your book recounts in considerable detail just how he maneuvered that and how many different connections he had inside the government. he served inside the government, used those connections.

and then, of course, parlayed that into a job as the head of martin. >> guest: and from there he engineers the lockheed martin merger. >> host: exactly. >> guest: and along the way decides, well, why we're at it, why don't we have the government subsidize that? >> host: that was the great coup. we get the government to pay us to kill off the competition. >> guest: and the argument was, well, we're going to cut overhead, so you owe us something. but, of course, if there's less business and you're consolidating, you know, presumably you're going to do that for business reasons, not because you get extra cash from the government. but he managed to work with bill perry and john deutsche who had had prior business -- >> host: and that was a very unholy connection, of course, that continued for years and years afterwards. bill with perry was already the most -- bill perry was already the most active proappropriate of industry -- proponent of

industry interests inside the pentagon. very, very deeply committed to the industry. and a defense industry finance capitalist himself. so his connection with norm augustine was a huge conflict of interest to start with. >> guest: and, in fact, they had to get a waiver because it was only about six months into the administration when they were, you know, really wiring this thing. and there were rules about working with people you had former financial relationships with. they were often violated, but in this case they went so far to sign a waiver saying, well, you know, we trust these guys. it's in the national interests, don't worry about it. but then they didn't publish in the federal register they had done this until congress started digging about a year later and found out all these details at which point a lot of money had already flown -- >> host: they had already subsidized the mergers. they had paid these companies to downsize. so simply by closing down

factories, the companies were making money. >> guest: and the one thing that did get congress' attention was they were sub si -- subsidizing the bonuses of these people. when the two boards merge, a bunch of people leave, they get golden parachutes. part of those were paid with government money. >> host: does that sound like an echo of today? >> guest: yes. [laughter] >> host: that's why the book is so totally on the money. it's on time, you know? people don't understand that the mega corporations in defense are just like the mega corporations among the banks. and they'll find out from your book in great detail how that works. >> guest: and so finally bernie sanders from vermont says, this is ridiculous, you know? we're subsidizing the bonuses, but the workers are getting very little. they're getting laid off. so he started calling it payoffs for layoffs. so he tried to get some of that money back, and he was partially

successful, but lockheed lawyers said, look, a lot of this stuff has already been appropriated. you can't take that back. we'll give you, you know, whatever's left that we haven't been paid yet. >> host: generous, indeed. and let's take a break. >> guest: okay, great. >> after words or and several other c-span programs are available for download as podcasts. more with william hartung and pierre sprey in a moment. >> here are the top ten best-selling conservative books from human events.com.

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hartung and pierre sprey continues. finish. >> host: so lockheed gets paid nicely to merge with martin. norm augustine achieves his ambition of creating the largest defense mega corporation in america, and how does his career proceed after that? >> guest: well, he's not done yet. because then they buy the defense division of loral corporation for about $9 billion just increasing them to, you know, far and away the largest defense contractor -- >> host: so they pick up more electronics for their business, yeah. >> guest: and in the meantime, he's head of this advisory panel called the defense policy advisory committee on trade. and they've got this whole agenda they've been pushing for subsidizing weapons exports which has been sort of stalled. and then finally he starts pushing once there's the gingrich revolution and gingrich has the big lockheed plant right outside his district. then timely they can get moving

on this agenda. so they create a $15 billion loan guarantee fund which is, basically, going to make it possible to sell maybe two, three, four times as many subsidized sales as they could do before with the regular aid program. >> host: with taxpayer money. >> guest: exactly. and also there's a little tax break thrown in for arms exporters and their clients, couple hundred million dollars there. but then they run up against this issue that there's a member of congress who says well, you know, if you're going to do these loans, you have to do them at the same rate and same credit standards that we do other government loans. and so suddenly nobody was interested because they had to put money up front. so they sold, i think, one radar system to romania, and then the thing sort of collapsed of its own weight. so he had created this doesn't, but then some smart thinking in congress really kind of blunted the benefits that he hoped to get from it. but at the same time they're working towards nato expansion.

a huge new market. >> host: that brings up another theme that's extremely interesting that i'd love for you to talk about it, the theme about how lockheed got involved in influencing, once again, the cold war as at the beginning in 1947 through the aircraft industry association they'd helped to start the cold war after the berlin wall came down and russia collapsed and suddenly everybody was left with no threat and no reason to have a huge defense budget. lockheed pitched in mightily, right? >> guest: yes. >> host: both to help start a new cold war through nato expansion. >> guest: there was a group called the u.s. committee to expand nato, and it ends up their main employee was bruce jackson who was also vice president of lockheed martin. >> host: very critically active vice president. >> guest: in many ways, yes. he was co-finance chair for dole for president campaign in 1996.

he chaired the platform committee for the 2000 republican convention to help create the platform that george w. bush ran on. he was very close with some of the republican financeiers, but he really started with this u.s. committee to expand nato. and he said, well, you know, this isn't related to what i do at lockheed. this is just my patriotic duty, sort of a little hobby i have, you know? but part of that hobby was trying to make sure as many countries as possible got into nato because then they would need, theoretically, equipment that would operate well with u.s. equipment. so they'd have to buy new communications equipment, new fighter planes, new ground equipment. so it was potential hi this huge new market. >> host: and, of course, even more dangerous was the fact that this was alarming the russians no end, you know, because they had been promised that there would be no nato expansion up to their borders, you know? back to reagan's time they'd

already been promised that. and here comes this committee and then the u.s. government and clinton falling right in with it. clinton very much under the influence of this committee and actually promoting every, every east european state they could find that would join up with nato. so it was terribly alarming to the russians, and that was, in fact, stoking the fires of the cold war. >> guest: well, you know, more than the other companies lockheed martin was really in the middle of a lot of these deals. >> host: very much so. again, they were the trend setter. >> guest: some of the other companies stood back a bit. but lockheed martin decided, well, if one of our vps can make this happen, this little boost from the companies certainly couldn't hurt. and then augustine did a kind of sales tour of eastern central europe. even told the romanians, you

know, if you buy a few things from us, we'll push harder for you to get into nato. >> host: which is an outrageous intervention in american diplomatic prerogatives for him to be promising the romanians, you know, an american commitment for nato in exchange for buying some weapons. totally outrageous. >> guest: and then they sent their or subcontractors around and said you buy from us, we'll do business with you, you know? you can help work on part of the engine for this thing, you can help build the tires, you know, there's business in this for polish industry, for example, if you buy american. we'll throw some of the money back your way. so it's almost sort of if you look at bribery or the passing back and forth of money, they're passing back and forth these large contracts in a way that, you know, that's sort of akin to bribery. so, you know, you buy from us, we'll throw you all this business. not only will you get to help build the plane, we'll help polish products around the world, even in some cases

competing with other u.s. industries. so this whole notion of offsets where you take a deal that's supposed to be a straight commercial deal and you put this quid pro quo in it and the pentagon turns the other way and says, you know, companies do what they need to do. we're not going to regulate this. that was sort of the modern version. it's not legal, it's not bribery per se, but it's that same concept of you buy from us, we'll take care of you. >> host: but that by no means the bribery has stopped because there's still lots of stuff going on behind closed doors. kashogi's still in business doing the same thing they did before. but, yes, in a much larger sense these offsets are just another way of invading people with american taxpayer money to buy lockheed products. >> guest: is and so in parallel to the nato expansion effort, there's this new group, the product for the new american

sentry which basically in the second clinton term says we need a new policy of military strength and, by the way, we should get rid of that saddam hussein guy. so they write to the president, they write to the heads of congress and say we need regime change in iraq. and then -- >> host: this was 1997 they wrote this huge manifesto about the necessity of deposing saddam, regime change, invasion of iraq, all that. >> guest: and then, of course -- >> host: and got rumsfeld and cheney involved. >> guest: rumsfeld, cheney, paul wolfowitz, all the architects of the iraq war already had this in mind back in the mid -- >> host: and had signed off on it, very formally signed off on this manifesto. >> guest: and then it ends up, you know, who's directing the thing but mr. jackson, the same lockheed vp who's involved with nato expansion. >> host: he was a part of this new american sentry. >> guest: yes. and from there he's helping write the platform for the republican party in 2000 and then later he comes at the

administration's request to co-chair the committee for the liberation of iraq which does all kinds of kind of publicity and public speaking, media work to try to stoke up support for the war in that period from late 2002 until march 2003 when the war begins in earnest. so, you know, i couldn't really find another company that had quite that kind of outreach and kind of that coordination with government. i mean, other companies do that kind of thing, but they don't -- i didn't see anything that was quite on the same scale. >> host: that's, that's why it was such a great idea to pick lockheed martin as the poster child for this whole set of problems that's affected our national security, and exactly why i found the book so fascinating. because they are the trend setter. >> guest: and then, you know, things like missile defense where it had sort of had it moment under reagan.

they're less interested under george h.w. bush, still spending billions of dollars, but not for the big astroturf global shield that was going to block every missile. >> host: by the way, can you just tell the lovely vignette in your book about how lockheed helped, helped fake a star wars test to keep the star wars budget going in the late reagan era? >> guest: well, yes. they were sort of looking for some successes -- >> host: they had a lot of failures, and there was a lot of skepticism out there. people were getting tired of star wars already. >> guest: it's really worth spending this money, we can make this thing work. so they had a thing called the homing overlay experiment which unfurled like an umbrella and was supposed to block the incoming warheads. so what they did, initially it was thought that they actually were going to blow up the warheads as they came in. you know, and then the second idea was, well, put a signal on it that says here i am, here i am, come and get me. finally, what they did was they

heated the warhead. they put it at an angle where it's much easier to detect -- >> host: and the heat made it easy for the infrared sensors to see it against the background. >> guest: so here we had this great success which is still being celebrated. the company put out a press release, first hit to kill and so forth. but then about ten years after it happened, it emerged because these engineers spoke up -- >> host: there was an investigation, right? >> >> guest: yes. >> host: congressional investigation, and it turned out the test was a complete phony. >> guest: but by then, you know, tense of billions of dollars -- tens of billions of dollars had been spent, so it was kind of this critical moment in the program where really, you know, lockheed helped bail out the government, and this kind of collusion, you know, to really make this test look like something that it wasn't, you know? >> host: and it kept the budget for star warses going which is what the purpose of faking the test was. >> guest: exactly. >> host: and there's lots of that still happening to this day, i can assure you.

>> guest: , you there was anothr thing, they were involved in helping craft the bush nuclear policy. >> host: that's a very important part of your book. >> guest: there was a group which had a lockheed martin executive on its board, and it appeared to get lockheed martin money. these think tanks don't really have to disclose those kinds of private donors, but given that they had a lockheed person on their board and they take corporate donations, pretty likely -- >> host: yeah. that's always a telling sign just as with the new american sentry. if bruce jackson was on the board of that, you can guarantee there was lockheed money involved. >> and so this panel that the national institute for public policy put together said, you know, we need usable nuclear weapons. we have to get deep underground facilities. perhaps we might use it in a situation in a war like in iraq. we should target more countries

with nuclear weapons, not just look at china and russia, but let's look at iran, let's look at north korea, let's look at cuba, let's look at syria. some more targets, more usable weapons, this whole sort of nightmare she scenario of what u would not want your nuclear policy to be. and so this is laid out sort of in the january before the bush administration comes in. and then their nuclear posture adopts many of these same suggestions. so could be, you know, great minds think alike, but certainly could be, you know, at least aggressive minds think alike, or it could be, you know, in fact, they had significant influence in the way this nuclear policy was put together. >> host: and you can imagine norm augustine was busy helping. >> guest: well, really an amazing, amazing group. i mean, you have to give them credit. i mean, they really have figured out how to work the system. >> host: and they do it ceaselessly, 24/7. of course, there's a lot of

money at stake, and they get well paid to do it. >>ing well, precisely. i mean, they're the wiggest campaign -- biggest campaign contributor, one of the biggest lobbying spenders right up there with boeing. and they're going to have a lot of work to do now because of the deficit. there's now talk about for the first time in ten years maybe we should at least level off, maybe we should cut back, maybe we need to spend money on things that actually might be used in afghanistan, not things like the f-22 fighter that have no applicability. so they're going to have to gear up the lobbying machine. and they've already got some good friends in the mix. buck mckeon who's going to run the armed services committee has the skunk works in his district, has many lockheed contributions, also has northrop grumman there, so he's going to be their sort of advocate on the hill to try to head off these calls for deficit reduction, for keeping military spending on the table, not just taking it from social security and discretionary civilian programs, but if we're

going to look across the board, what do we really need to defend the country? do we need to spend the most we've spent since world war ii, or can we defend the country with less than that? >> host: and there's already powerful propaganda from the industry saying why defense has to be exempted from those cuts. sounds very much like the same propaganda they were putting out in '46 and '47 when they were facing massive cuts too. exactly -- we must keep this capability in place. the national defense is so important, we can't consider cuts, you know? it's all the same rhetoric. >> guest: and then, of course, in a pinch if that doesn't work, there's the jobs argument. which started really back in the '30s. at every turn when there's a threat to the industry, that's the argument that comes out. when the f-22 combat aircraft was threatened with being eliminated by robert gates and president obama, suddenly it was a job ares program. 95,000 jobs, 46 states, it's a

recession, how could you possibly do this? so i dug into it a little bit. ends up those 95,000 job ares maybe were 30 or 40,000 jobs -- >> host: at most. >> guest: maybe those 46 states were not really 46 states. and it was one example of where kind of the exception proves the rule. they were able to stop the program. president obama had to threaten to veto any bill that contained the f-22. but at the same time once it was canceled, they increased the f-35, another lockheed martin plane -- >> host: and a worse one. >> guest: for the same amount. so they cut four billion from the f-22, they put four billion into the f-35. and even the factory in georgia which was the main place it was being assembled. the senator said, you know, actually, we'll be all right. we've got the c-130, you know, the jobs are here. so there was this big jobs scare to try to save the program, but in fact, they were being taken care of. and secretary gates even said as much. he said, you know, we're taking

care of the industrial base here because there'll be more jobs in the f-5 program than even in the f-22. so i think you can take on these companies, but they're so big, and they've got their fingers in so many different pies -- >> host: and they own so many congressmen, you know? as you recount in your book on the c -5. a wonderful example. they lost the competition, technically, to boeing, and they mustered so much horsepower in the congress and with president johnson that they won the contract. >> guest: it was fascinating because they really were were nt going to win. >> host: right. they were technically inferior to boeing. boeing had a better design, and the boeing design became the 747, one of the most successful airliners of all time. but because of lockheed's clout with senator russell, you know, these hugely powerful people in the house and the senate. >> host: and, of course,

russell, you know, he had georgia, he had a specific parochial interest. the mayor of marietta later said, you know, russell didn't think this was a good plane either, but he had to take care of our state. so he was sort of a mentor to lyndon johnson, he was the head of the armed services committee. he headed the defense appropriations subcommittee. so he really, you know, if you needed one person on your side, this was the person you would want. >> host: and they had him. >> guest: and when president johnson came to actually announce the award, he said, oh, there's plenty of places that would like to have this. but nobody else has the georgia delegation. and so that's why, you know, this is going to happen. and then on the other side he had rivers from south carolina, and they're offering to put a factory in his district, the subcontractors have factories in the his district. there's a bust of him as you come into town. lockheed martin helps pay for the statue. so every possible way of trying to influence this guy. and, of course, this was

standard operating procedure for him. his campaign slogan was rivers delivers. >> host: it's still standard operating procedure. lockheed's doing the same thing with the georgia delegation now. nothing's changed. yeah. >> guest: so, you know, sort of the jobs argument, the where you place your factories in some ways, i think, has more influence even than the campaign money because you can point to the factory and say, you know, i helped you get in this. >> host: it's called political engineering. where you place the contacts, you place them where the votes are in the senate and the house. it's a very damaging game that greatly damages the quality of the product. i mean, you start sprinkling factories all over the place. >> guest: and it becomes a bipartisan support network. not just republicans, not just democrats, but really based on -- >> host: it's very important to get both parties involved. >>ing -- >> guest: and then it becomes even worse because they say,

look, i'll support your weapon the you support mine. and then people from states do not directly benefit saying, well, i need this guy with me when they vote for something that affects my state. so it's a very hard kind of, you know, sort of this whole wall of supporters that you have to get past to make sensible defense policy. >> host: is you just briefly touch on, a whole other arena in your book where lockheed martin is trying to expand its tentacles into the civil sector. and you had a wonderful vignette of how they were going to run the welfare program for the state of texas. can you just briefly mention that? >> guest: yes. they, well, they've gotten into all manner of, you know, information gathering; surveillance, they work for the irs now, they work for the census, they work for the postal service, they train those transportation security agents who pat you down at the airport. but they really started with this texas project. the idea being with welfare

reform it was giving more leeway to privatize some of these functions including deciding who should get welfare in the first place. so lockheed martin wants to be the screening -- >> host: so they would look at welfare cases and decide this person is eligible, this person is not. >> guest: right. >> host: be a private contractor doing this. >> guest: exactly. [laughter] and they had the same methods you would use to get a defense contract. so they hired former aide to george w. bush who was then governor of texas who would help write the privatization section of the texas law. he became a lobbyist for them. this was investigated as to whether it was too much of a quid pro quo. nothing became of it, but it did elevate it in the public mind. and then the union started running ads with the sound of a flushing toilet saying, you know, the company that brought us the $3,000 toilet seat now wants to run public service in

texas. and they were hailing back to the spare parts scandal in the reagan era where lockheed martin was right in the middle of that in terms of overcharging the government. they used the revolving door, but ultimately they couldn't quite get over the top. they wanted a waiver from the federal government to run more of welfare programs, medicaid as well as regular welfare. they didn't get that waiver. they were up against ross perot's former company. it was this whole issue of, well, they're not really a texas company. they had just shut down a factory outside of austin, so there was some ill will. they tried to use the same methodology that they would use to get, say, a fighter plane contract. but in this local politics they were a little bit lost. they couldn't quite get it done. but they were still doing job training in the florida, tracking down deadbeat dads in connecticut, running similar projects in california all of which ran into some significant problems. they were crunching data that wasn't coming out right. contract they were sending --

connecticut they were sending checks where they weren't supposed to be going. so the question now is going to be, you know, if they're running aspects of, you know, processing your taxes, if they're helping design the census, if they're involved in this transportation security, where aren't they going to be? and is it appropriate for the same company to be doing all these funks? >> host: and, of course, there's the question of their we tension. this is the same company that brought you a fighter that got thrown out of germany, another fighter that killed 85 german airplane force pilots, you know, a c 5 that became the most expensive boondoggle in american contracting history, and these people want to come and decide on welfare cases and send out checks to wounded veterans which they failed to do. there was a huge oversight committee on that that actually the contract was canceled because they did such a terrible job of sending out just plain checks to wounded veterans. so that whole question of these

mega corporations is not just that they're huge and that they're using our money to stuff their executives' pockets, but what they deliver, you know, is a very shabby quality. you know? whether it's in defense or whether it's in welfare or whether it's sending out wounded veterans' checks. and that's why i feel so strongly that the subject matter of this book, lockheed martin as a poster child for defense mega corporations and for what's wrong with american security, why your book is such a valuable contribution and comes just bang on, exactly at the right time. i think we really owe you a debt of brat tuesday for having done it. >> guest: oh. and as eisenhower said, if you're going to deal with the military industrial complex, you need an alert and knowledgeable citizenry. people are distracted by shouting heads on cable, by their own economic