[Congressional Record Volume 143, Number 103 (Monday, July 21, 1997)]
[Senate]
[Pages S7744-S7745]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      SETTING THE RECORD STRAIGHT

  Mr. GRASSLEY. Mr. President, I come to the floor today to set the 
record straight.
  Defense Week reports that I made inaccurate statements during the 
recent debate on the Boxer-Grassley-Harkin amendment on executive 
compensation.
  The article was written by Mr. Tony Capaccio and appears in the July 
14 issue of his publication.
  Mr. President, I ask unanimous consent to have that portion of the 
Defense Week article printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                    Senate Rejects Maverick Measure

       In endorsing the committee proposal, the Senate in a 83-16 
     vote rejected an amendment by Sens. Barbara Boxer (D-Calif.), 
     Charles Grassley (R-Iowa) and his Democrat counterpart Tom 
     Harkin.
       Their amendment would have made permanent a $200,000 cap 
     applicable to all government contractors and not just the top 
     five in a headquarters or division.
       In their floor debate, Boxer and Grassley singled out as an 
     example of the 1995 law's problems the compensation packages 
     of five top McDonnell Douglas Corp. corporate officers, 
     examined by a July 8 report GAO report.
       The MDC executives, labeled Nos. 1 through 5, earned a 
     total of $14.8 million in 1995, according to information 
     contained in a March 31 DCAA report and repeated by GAO. 
     Boxer and Grassley said the GAO indicated that based on the 
     huge compensation packages, the 1995 cap was riddled with 
     loopholes.
       Grassley declined to name the executives, saying their 
     identities were ``proprietary.'' Defense Week learned that 
     the unnamed executives, followed by their 1995 compensation 
     packages, are: CEO Harry Stoneciper, $4 million; Chairman of 
     the Board John F. McDonnell, $3.9 million; then-McDonnell 
     Douglas Aerospace Co. Executive Vice President & President 
     John Capellupo, $2.3 million; MDA Deputy President Herbert 
     Lanese, $2.3 million; and, then-Douglas Aircraft Co. 
     president Robert H. Hood, $2.2 million.
       Grassley was inaccurate when he said during the floor 
     debate that the Pentagon picked up $9.2 million of the 
     compensation.
       That was the amount corporate MDC allocated to the overhead 
     pools of divisions that had DOD contracts, according to 
     government officials. That overhead would then be divided 
     between commercial, general government and defense contracts.
       It was not possible to trace how much actually the Pentagon 
     reimbursed.

  Mr. GRASSLEY. I think there is a misunderstanding, and I would like 
to clear it up.
  Mr. President, I pride myself on always doing my homework and 
sticking to the facts.
  So when someone accuses me of straying from the facts, I like to 
address the criticism head on.
  I would like to resolve the issue one way or the other.
  To do that, I went back to the place where I got the information in 
the first place.
  That's the General Accounting Office [GAO] in St. Louis, MO--near 
McDonnell Douglas headquarters.
  The man with the knowledge there is Mr. Robert D. Spence.
  I went back to Mr. Spence to check and recheck the facts to be 
certain my statements were consistent with the facts.
  The disputed information pertains to the amount of money the 
Department of Defense [DOD] pays out to senior executives at the 
McDonnell Douglas Corp.
  I presented those facts during the debate over executive compensation 
on July 10.
  The facts that Defense Week questions appear on page S7172 of the 
Congressional Record.
  This is what I said.
  The DOD paid the top five executives at McDonnell Douglas a total of 
$9,273,382.00.
  I said the top executive got $2,713,308.
  To back up that statement, I will place a table in the Record.
  This table was prepared by the GAO but the information came straight 
from the horse's mouth--the Defense Contract Audit Agency or DCAA.
  The table shows how much each of the five top executives at McDonnell 
Douglas was paid by the Pentagon.
  Now, Mr. Capaccio says that information is inaccurate.
  He says the top five executives were not paid $9,273,382.00 by DOD.
  He says that is the amount allocated to the overhead pools of the 
company's many components or subdivisions.
  He said that money would then have to be divided between commercial, 
general government, and defense contracts.

[[Page S7745]]

  Mr. President, I hate to say it, but Defense Week is flat wrong.
  As I said, Mr. President, I went back to the GAO and Mr. Spence to 
check and recheck my information.
  It checks out OK.
  My information comes directly from the DCAA.
  First, to get the DOD pay figures for the top five executives, DCAA 
had to query the field offices at each McDonnel Douglas subdivision.
  This was done to establish the split between DOD, non-DOD government, 
and commerical contracts.
  This was done to isolate the amounts charged to DOD contracts.
  That's what the GAO table does.
  It isolates the $9,273,382.00 as the amount allocated to components 
with DOD contracts.
  DOD contracts--that's the key.
  My numbers have absolutely nothing to do with general government or 
commercial contracts.
  So that's a bogus argument.
  Second, the dollar totals on the GAO table are not 100-percent 
accurate.
  I will be the first to admit that.
  They were not audited in every case.
  But they are considered reasonably accurate. They're in the ballpark.
  If the GAO and DCAA numbers aren't accurate enough, then Defense Week 
should produce a better set.
  And it admits it can't do that.
  Third, Mr. President, I need to clarify one point.
  The Pentagon, for example, did not send McDonnell Douglas' top 
executive a paycheck for $2,713,308.00.
  That's not how it really works.
  There are no individual DOD paychecks that go to executives; 
$2,713,308.00 is the amount McDonnell Douglas is allowed to bill the 
taxpayers on DOD contracts for that individual's salary.
  That is the amount set aside in DOD contracts for that individual's 
compensation package.
  Once the amount is approved by DCAA, it is then apportioned across 
hundreds of contract payments.
  It's doled out piecemeal in thousands of U.S Treasury checks.
  But it's there in those checks.
  McDonnell Douglas got the money.
  The money came from DOD.
  The money was for executive compensation.
  Just because it was a small part of a big payment doesn't make the 
money any less real.
  It doesn't make it play money.
  In the end, Mr. President, no matter how you slice it, DOD paid 
McDonnell Douglas' top five executives $9.3 million.
  I ask unanimous consent that the table I referred to earlier be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                         MDC ALLOCATION OF COMPENSATION TO COMPONENTS--TOP 5 EXECUTIVES
----------------------------------------------------------------------------------------------------------------
                                                                       Total
                                                                   compensation                       Amounts
                                                                        for            Total       allocated to
                            Executive                             application of   compensation     components
                                                                   compensation      $250,000        with DOD
                                                                        cap                          contracts
----------------------------------------------------------------------------------------------------------------
1...............................................................      $4,012,833      $3,762,833      $2,713,308
2...............................................................       3,920,559       3,670,559       2,646,773
3...............................................................       2,383,974       2,133,974       2,046,481
4...............................................................       2,303,713       2,053,713       1,833,604
5...............................................................       2,238,966       1,988,966          33,216
    Total.......................................................      14,860,045      13,610,045       9,273,382
----------------------------------------------------------------------------------------------------------------

                                                                                                  

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