Lockheed Bribery Scandals
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The Lockheed bribery scandals encompassed bribes and contributions made by officials of U.S.
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company Lockheed from the late 1950s to the 1970s in the process of negotiating the sale of
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. The scandal caused considerable political controversy in
West Germany West Germany was the common English name for the Federal Republic of Germany (FRG) from its formation on 23 May 1949 until German reunification, its reunification with East Germany on 3 October 1990. It is sometimes known as the Bonn Republi ...
,
Italy Italy, officially the Italian Republic, is a country in Southern Europe, Southern and Western Europe, Western Europe. It consists of Italian Peninsula, a peninsula that extends into the Mediterranean Sea, with the Alps on its northern land b ...
,
the Netherlands , Terminology of the Low Countries, informally Holland, is a country in Northwestern Europe, with Caribbean Netherlands, overseas territories in the Caribbean. It is the largest of the four constituent countries of the Kingdom of the Nether ...
, and
Japan Japan is an island country in East Asia. Located in the Pacific Ocean off the northeast coast of the Asia, Asian mainland, it is bordered on the west by the Sea of Japan and extends from the Sea of Okhotsk in the north to the East China Sea ...
. In the U.S., the scandal nearly led to Lockheed's downfall, as it was already struggling due to the commercial failure of the L-1011 TriStar
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.


Background

Through the Emergency Loan Guarantee Act of 1971, the Emergency Loan Guarantee Board was created to manage federally guaranteed private loans up to $250 million to Lockheed Corporation. The guarantee program would have the U.S government assume the private debt of Lockheed if it defaulted on its debts. In August 1975 the board investigated whether Lockheed violated its obligations by failing to tell the board about foreign payments made to Lockheed. On October 14, 1977, Lockheed and its 24 lending banks entered into a credit agreement, providing for a $100 million revolving line of credit, to replace the government guarantee commitment; this was used to retire $60 million worth of Lockheed debt. The Emergency Loan Guarantee Board approved the new credit agreement on October 14, 1977 through a termination agreement that closed the Government Emergency Loan Guarantee Board after issuance of its final report on September 30, 1977. Fees paid by Lockheed and its banks to the Board for administering the program loan netted around $30 million, which was sent to the U.S. Treasury. In late 1975 and early 1976, a subcommittee of the U.S. Senate led by Senator Frank Church concluded that members of the Lockheed board had paid members of friendly governments to guarantee contracts for
military aircraft A military aircraft is any Fixed-wing aircraft, fixed-wing or rotorcraft, rotary-wing aircraft that is operated by a legal or insurrectionary military of any type. Some military aircraft engage directly in aerial warfare, while others take on su ...
. In 1976, it was revealed that Lockheed had paid $22 million in bribes to foreign officials in the process of negotiating the sale of aircraft, including the F-104 Starfighter, the so-called "Deal of the Century"."Lockheed's Defiance: A Right to Bribe?"
''Time'' magazine, August 18, 1975


West Germany

Former Lockheed lobbyist Ernest Hauser told Senate investigators that West German
Minister of Defence A ministry of defence or defense (see spelling differences), also known as a department of defence or defense, is the part of a government responsible for matters of defence and military forces, found in states where the government is divid ...
Franz Josef Strauss and his party had received at least $10 million for the purchase of 900 F-104G Starfighters in 1961. The party and its leader denied the allegations, and Strauss filed a slander suit against Hauser. As the allegations were not corroborated, the issue was dropped. In September 1976, in the final phase of the West German federal election, the controversy was re-opened when questions were asked about the whereabouts of the "Lockheed documents" within the Federal Ministry of Defence. Anonymous sources also distributed several, possibly falsified, documents to the media. According to one of these documents, member of the German
Bundestag The Bundestag (, "Federal Diet (assembly), Diet") is the lower house of the Germany, German Federalism in Germany, federal parliament. It is the only constitutional body of the federation directly elected by the German people. The Bundestag wa ...
and its defense council Manfred Wörner accepted an invitation by Lockheed to visit their aircraft plants in the U.S. with the entire trip being paid by Lockheed. In the course of the investigations, it emerged that most of the documents related to the Starfighter purchase had been destroyed in 1962. The whereabouts of the documents were again discussed in a committee of inquiry meeting of the Bundestag between January 1978 and May 1979. An investigation of Lockheed documents by the U.S. revealed that Wörner's trip had been financed by the German Bundestag, and was related to a test flight with the Lockheed S-3 Viking. Only part of the travel costs of Wörner's secretary, and Wörner's flight back from the US to Germany was paid by Lockheed:


Italy

The Italian branch of the Lockheed scandal involved the bribery of Christian Democrat and
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politicians to favor the purchase by the Italian Air Force of
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transport planes. The allegations of bribery were supported by political magazine '' L'Espresso'', and targeted former Cabinet ministers Luigi Gui and Mario Tanassi, the former Prime Minister Mariano Rumor and President Giovanni Leone, forcing him to resign on June 15, 1978.


Japan

The scandal involved the Marubeni Corporation and several high-ranking members of Japanese political, business, and
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circles, including Finance Minister Eisaku Satō and the JASDF Chief of Staff Minoru Genda. In 1957, the Japanese Air Self-Defense Force wished to buy the
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to replace the
F-86 Sabre The North American F-86 Sabre, sometimes called the Sabrejet, is a transonic jet fighter aircraft. Produced by North American Aviation, the Sabre is best known as the United States' first swept-wing fighter that could counter the swept-wing Sov ...
then in service, but heavy lobbying by Lockheed of key Liberal Democratic Party figures led to the adoption of the F-104 instead. Later, Lockheed hired underworld figure Yoshio Kodama as a consultant in order to influence Japanese parastatal airlines, including
All Nippon Airways (ANA) is a Japanese airline headquartered in Minato, Tokyo. ANA operates services to both domestic and international destinations and is Japan's largest airline, ahead of its main rival flag carrier Japan Airlines. the airline has approximate ...
(ANA), to buy the
Lockheed L-1011 TriStar The Lockheed L-1011 TriStar (pronounced "El-ten-eleven") is an American medium-to-long-range, wide-body trijet airliner built by the Lockheed Corporation. It was the third wide-body airliner to enter commercial operations, after the Boeing 747 ...
instead of the McDonnell Douglas DC-10. On February 6, 1976, the vice-chairman of Lockheed told the Senate subcommittee that Lockheed had paid approximately $3 million (equivalent to $ in ) in bribes to the office of Japanese Prime Minister Kakuei Tanaka for aid in the matter. Lockheed paid ¥2.4 billion (equivalent to $ in )We need to convert the yen amounts to dollars using the exchange rate in 1972, and then adjust them for inflation using the consumer price index (CPI) of the United States. According to th
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the exchange rate of the yen to the dollar in 1972 was about ¥314.86 per US$1. According t

the CPI of the United States in 1972 was 41.8. The CPI of the United States in 2023 is projected to be 291.6.
to earn the contract from ANA. ¥500 million ($ in ) of the total was received by the Prime Minister. ¥160 million ($ in ) was received by ANA officials. ¥1.7 billion ($ in ) was received by Kodama. On October 30, 1972, ANA announced its decision to purchase 21 Lockheed L-1011 Tristars, which cost approximately $5 million each, totaling $105 mi ($ in ), even though it had previously announced options to purchase the DC-10. The 1986 US President's Commission on Organized Crime revealed that from 1969 to 1975 Lockheed used Deak & Company, a large foreign exchange operator owned by Nicholas Deak, as the conduit to transfer money intended by Lockheed to bribe Japanese officials. It was disclosed that US$8.3 million ($ in ) was moved to Deak's offices in Hong Kong, where a Spanish-born priest representing Lockheed took the cash and carried it to Japan. In March 1976, in protest of the scandal, actor Mitsuyasu Maeno made a suicide attack on Kodama's Tokyo home by crashing a light aircraft onto it. Maeno died and two servants were injured. Kodama himself was unharmed. Tanaka was arrested on July 27, 1976, and was released in August on a ¥200 million ($690,000) bond. He was found guilty by a Tokyo court on October 12, 1983, for violations of foreign exchange control laws but not on bribery. He was sentenced to four years in prison, but remained free on appeal until his death in 1993.


The Netherlands

In December 1975, it surfaced that Prince Bernhard of the Netherlands received a $1.1 million bribe in the early 1960s from Lockheed to ensure the Lockheed F-104 would win out over the Dassault Mirage 5 for the purchase contract. He had served on more than 300 corporate boards or committees worldwide and had been praised in the Netherlands for his efforts to promote the economic well-being of the country. Prime Minister Joop den Uyl ordered an inquiry into the affair, while Prince Bernhard refused to answer reporters' questions, stating: "I am above such things". The results of the inquiry led to a
constitutional crisis In political science, a constitutional crisis is a problem or conflict in the function of a government that the constitution, political constitution or other fundamental governing law is perceived to be unable to resolve. There are several variat ...
in which
Queen Juliana Juliana (; Juliana Louise Emma Marie Wilhelmina; 30 April 1909 – 20 March 2004) was List of monarchs of the Netherlands, Queen of the Netherlands from 1948 until her abdication in 1980. Juliana was the only child of Queen Wilhelmina and Duke ...
threatened to abdicate if Bernhard was prosecuted. Bernhard was spared, but had to step down from several public positions and was forbidden to wear his military uniforms again. Prince Bernhard always denied the charges, but after his death on December 1, 2004, interviews were published showing that he admitted taking the money. He said: "I have accepted that the word Lockheed will be carved on my tombstone." Declassified correspondences between U.S. Ambassador to the Netherlands Kingdon Gould Jr. and
Henry Kissinger Henry Alfred Kissinger (May 27, 1923 – November 29, 2023) was an American diplomat and political scientist who served as the 56th United States secretary of state from 1973 to 1977 and the 7th National Security Advisor (United States), natio ...
showed that Kissinger was informed of the bribes in 1975.


Saudi Arabia

Between 1970 and 1975, Lockheed paid Saudi arms dealer
Adnan Khashoggi Adnan Khashoggi (; 25 July 1935 – 6 June 2017) was a Saudi businessman and arms dealer known for his business dealings, extensive geopolitical influence, and opulent lifestyle, which earned him the moniker "''The Jay Gatsby, Great Gatsby ...
$106 million in commissions. His commissions started at 2.5% and eventually rose to as much as 15%. Khashoggi "became for all practical purposes a marketing arm of Lockheed. Adnan would provide not only an entrée but strategy, constant advice, and analysis", according to Max Helzel, then vice president of Lockheed's international marketing.


Aftermath

Lockheed chairman of the board Daniel Haughton and vice chairman and president Carl Kotchian resigned from their posts on February 13, 1976. The scandal also played a part in the formulation of the Foreign Corrupt Practices Act which President
Jimmy Carter James Earl Carter Jr. (October 1, 1924December 29, 2024) was an American politician and humanitarian who served as the 39th president of the United States from 1977 to 1981. A member of the Democratic Party (United States), Democratic Party ...
signed into law on December 19, 1977, which made it illegal for American persons and entities to bribe foreign government officials. According to Ben Rich, director of Lockheed's Skunk Works:


See also

* Al-Yamamah arms deal * Captain Lockheed and the Starfighters * Military-industrial complex


References


Further reading

* Solomon, L. & Linville, L. (1976) ''Transnational Conduct of American Multinational Corporations: Questionable Payments Abroad'', 17 B.C.L. Rev. 303
Transnational Conduct of American Multinational Corporations: Questionable Payments Abroad
* Sampson, A. (1977) ''The Arms Bazaar: From Lebanon to Lockheed'', Viking, * Sampson, A. (1976) ''Lockheed's Foreign Policy: Who, in the End, Corrupted Whom?'' New York Magazine, March 15, 1976, pp. 53–5
New York Magazine
* Boulton, D. (1978) ''The Grease Machine: The inside Story of Lockheed's Dollar Diplomacy'', New York: Harper and Row. * Hunziker, S. & Kamimura, I. (1996) ''Kakuei Tanaka, A political biography of modern Japan'', Singapore: Times Edition

* Mitchell, R. (1996) ''Political Bribery in Japan''. Honolulu: University of Hawaii Press. * Hartung, W. (2010) ''Prophets of War: Lockheed Martin and the Making of the Military-Industrial Complex'', Nation Books, {{DEFAULTSORT:Lockheed Bribery Scandals Corporate scandals Corruption in Germany Japan–United States relations Bribery scandals Lockheed F-104 Starfighter Political controversies Royal scandals in the Netherlands Franz Josef Strauss