[Congressional Record Volume 150, Number 135 (Saturday, November 20, 2004)]
[Senate]
[Pages S11776-S11789]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        BOEING 767 TANKER LEASE

  Mr. McCain. Mr. President, yesterday I spoke on the Senate floor 
regarding the investigation into the Air Force proposal to acquire 
Boeing 767 aerial refueling tankers. During my 45 minute remarks, I had 
made reference to certain letters, press articles and e-mails I ask 
unanimous consent that that material at a cost of $3,200.00 be printed 
in the Record of today's proceedings.

                                                      U.S. Senate,


                                  Committee on Armed Services,

                                     Washington, DC, Dec. 2, 2003.
     Hon. Paul Wolfowitz,
     Deputy Secretary of Defense,
     Washington, DC.
       Dear Secretary Wolfowitz: I commend the Secretary of 
     Defense and yourself for the prompt actions you have taken 
     regarding the Air Force's tanker aircraft program, in light 
     of recent extraordinary personnel actions taken by the Boeing 
     Company. Your decision to require a ``pause'' in the 
     execution of any contracts to lease and purchase tanker 
     aircraft is a prudent management step.
       Further, I concur in your judgment to task the Department 
     of Defense Inspector General, DOD-IG, to conduct an 
     independent assessment. However, I believe that the DOD-IG 
     assessment should go further than the review described ion 
     your letter of December 1, 2003. The DOD-IG inquiry should 
     pursue the trail of evidence wherever it leads, in accordance 
     with standard IG procedures. This inquiry should examine the 
     actions of all members of the Department of Defense and the 
     Department of the Air Force, both military and civilian, top 
     to bottom, who participated in structuring and negotiating 
     the proposed tanker lease contract which was submitted to the 
     Congress in July 2003.
       Your recent actions clearly indicate that there are many 
     outstanding questions that must be answered before proceeding 
     with this program. I expect that you will consult further 
     with the Congress as you receive the report of the DOD-IG and 
     that no actions will be taken with respect to the lease and 
     purchase of KC-767 tanker aircraft until the Congress has had 
     an opportunity to review the DOD-IG report. Ultimately, this 
     program, as restructured, must be executed in a manner that 
     is fully consistent with Section 135 of the National Defense 
     Authorization Act for Fiscal Year 2004 (Public Law 108-136).
       With kind regards, I am
           Sincerely,
                                                      John Warner,
     Chairman.
                                  ____

                                                      U.S. Senate,


                                  Committee on Armed Services,

                                    Washington, DC, Nov. 19, 2004.
     Hon. Donald H. Rumsfeld,
     Secretary of Defense,
     Washington, DC.
       Dear Mr. Secretary: On December 2, 2003, Chairman Warner 
     wrote to Deputy Secretary Wolfowitz to request that the 
     Department of Defense Inspector General (DOD IG) conduct a 
     thorough investigation of the KC-767A tanker aircraft 
     program. According to Chairman Warner's letter ``this inquiry 
     should examine the actions of all members of the Department 
     of Defense (DOD) and the Department of the Air Force, both 
     military and civilian, top to bottom, who participated in 
     structuring and negotiating the proposed tanker lease 
     contract which was submitted to the Congress in July 2003.'' 
     A copy of that letter is attached.
       It was our understanding that the requested DOD IG review 
     would assess not only individual responsibility for any 
     allegations of criminal violations of law; but, equally 
     important, individual accountability for management decisions 
     and executive oversight. In essence, the Senate Committee on 
     Armed Services, in order to conduct its necessary legislative 
     oversight of the Department of Defense, needs to know what 
     happened, who was accountable and what actions must be taken 
     to prevent this situation from happening again.
       It is astonishing to us that one individual could have so 
     freely perpetrated, for such an extended period, this 
     unprecedented series of fraudulent decisions and other 
     actions that were not in the best interest of the Department 
     of Defense.
       We recently found out that no such managerial 
     accountability review has been undertaken by the DOD IG. 
     Rather, the DOD IG limited his review to determining whether 
     there was evidence to press criminal charges. We are deeply 
     concerned by this development. Given the Chairman's letter, 
     why was a decision made not to do this work?
       Congressional oversight of the proposed contract to lease 
     100 KC-767A tanker aircraft, a contract which is now 
     prohibited by section 133 of the National Defense 
     Authorization Act for Fiscal Year 2005, uncovered the most 
     significant defense procurement scandal since the Ill Wind 
     bribery and fraud

[[Page S11777]]

     cases of the 1980s. It is imperative that the Department take 
     actions to hold those responsible accountable. Otherwise, the 
     fallout from this Air Force procurement scandal will have 
     disastrous effects on the integrity of the acquisition 
     system.
       In our view, an assessment of accountability should include 
     a review of all members of the Department of Defense and the 
     Department of the Air Force, both military and civilian, who 
     participated in structuring and negotiating the proposed 
     tanker lease contract. Most importantly, this should include 
     Secretary of the Air Force Jim Roche, and Assistant Secretary 
     of the Air Force Marvin Sambur. We reiterate the Committee's 
     request that the DOD IG immediately initiate such an 
     accountability review.
       Again, we do not understand how one individual could have 
     amassed so much power that she was able to perpetuate such 
     fraud against the federal government and other actions that 
     were not in the best interest of the Department of Defense. 
     Where was the oversight? Where were the checks and balances? 
     At a minimum, the acquisition chain of the Air Force, and 
     perhaps DOD, was woefully inadequate. The fact that no 
     Departmental review of these questions has been conducted 
     raises significant accountability and oversight questions 
     that go far beyond this one case. We trust you will endeavor 
     to rectify the situation and hold those who are responsible 
     accountable.
           Sincerely,
     Carl Levin, 
       Ranking Member.
     John McCain,
       U.S. Senator.
     John Warner,
       Chairman.
                                  ____



                                  Deputy Secretary of Defense,

                                    Washington, DC, Nov. 19, 2004.
     Hon. John W. Warner,
     Chairman, Committee on Armed Services,
     U.S. Senate, Washington, DC.
       Dear Mr. Chairman: As you know, the Department soon will 
     complete the analysis of alternatives (AoA) for 
     recapitalization of the KC-135 tanker aircraft fleet, and 
     that portion of a broader mobility capability study (MCS) 
     related to aerial refueling. Based upon the recommendations 
     of the Defense Science Board, I accelerated, to November of 
     this year, the schedule for completion of these initiatives. 
     The AoA and MCS will be critical to our development of a plan 
     to recapitalize the tanker fleet, and to provide adequate 
     aerial-refueling capabilities for military aircraft over the 
     long term.
       In structuring the AoA and MCS, we recognized that we 
     should base the recapitalization of the fleet on a thorough 
     and careful assessment of the ways in which we might perform 
     the aerial-refueling mission. To ensure that we consider all 
     viable solutions, the AoA addresses a wide range of 
     alternatives, from the retention and re-engineering of KC-
     135E aircraft to the development of a new military tanker 
     aircraft.
       Let me be clear: After we have selected an appropriate 
     alternative, we intend to require competition. No matter 
     which alternative we choose, leasing is not an option without 
     new congressional authority.
           Sincerely,
     Paul Wolfowitz.
                                  ____


                 [From the Defense News, Nov. 3, 2003]

                            Full Disclosure

       In March, Defense News published a commentary by Adm. 
     Archie Clemins, former commander in chief of the U.S. Pacific 
     Fleet. In it, he advocated a U.S. Air Force plan to lease 100 
     planes from Boeing Co., which would modify the 767s for the 
     Air Force's aerial refueling mission. That a Navy man would 
     back an Air Force program is what made it intriguing.
       What we didn't know at the time was that Clemins did not 
     write the piece. Nor did he think on his own to write it. 
     Nor, for that matter, did he even think to send it to Navy 
     Times, a sister publication, without prompting.
       In truth, a Boeing representative came up with the idea, 
     asked Clemins to write it, and provided a writer to help get 
     the job done. Boeing also suggested where he ought to send it 
     and provided him the e-mail address.
       Clemins says he was not paid for the article and stands by 
     what it says. We believe that.
       But he acknowledged that prior to writing the article, he 
     had done some paid consulting work for Boeing, and that he 
     has since developed a more formal consulting arrangement with 
     the company. He said he made no effort to ``pull the wool 
     over anyone's eyes.''
       In publishing the piece, regardless of who actually wrote 
     it, we provided a forum for the free flow of ideas. That is 
     the purpose of our Commentary pages.
       But we failed to do some things we should have done. We 
     should have asked Clemins if he had a financial relationship 
     with the program or the contractor. We should have asked if 
     he had, in fact, written the article himself. And we should 
     have weighed his answers in our thinking, because that 
     information is essential to the context of his article.
       Had we known those things, we might still have published 
     his opinion. But we would have included the other writer's 
     name and noted Clemins' relationship with Boeing among his 
     credentials at the end of the article. As it was, we merely 
     noted that he was the former commander of the Pacific Fleet--
     true, but not the whole story.
       Full disclosure is what we're after. Here, we fell short. 
     We will work hard to ensure this doesn't happen again.
                                  ____


                [From the Seattle Times, Nov. 18, 2004]

           Lockheed Allegations Focus on Boeing's Chief Exec

       Lockheed Martin has introduced evidence in a civil lawsuit 
     that allegedly demonstrates Boeing Chief Executive Harry 
     Stonecipher knew former Air Force acquisitions officer 
     Darleen Druyun gave Boeing preferential treatment in the 
     award of billions of dollars of Defense Department contracts 
     before she joined the company last year.
       Additionally, Lockheed introduced evidence it says shows 
     Stonecipher and James Albaugh, chief executive of Boeing's 
     Integrated Defense Systems unit, attended a September 1998 
     meeting with Druyun and Air Force Col. Richard McKinney in 
     which Boeing allegedly received details of a confidential 
     Lockheed proposal to provide rocket launches to the Air 
     Force.
       Druyun received a nine-month prison sentence last month for 
     holding job talks with Boeing while still overseeing Boeing 
     business at the Air Force. She further admitted to awarding 
     more than $5 billion of Defense Department contracts to 
     Boeing in exchange for jobs for her daughter, her son-in-law 
     and herself.
       Boeing and Stonecipher have been adamant that if Druyun 
     showed the company any favoritism, Boeing was not aware of 
     it.
       ``The statements Ms. Druyun made in her sentencing papers 
     came as a total surprise,'' Boeing said last month.
       However, Lockheed said in a court filing last week that it 
     has ``an e-mail written by Mr. Stonecipher admitting that 
     Darleen Druyun had favored Boeing in the past.''
       It is not clear from the filing when the e-mail was 
     written. The e-mail itself was placed under seal by the 
     court.
       Lockheed and Boeing officials could not be reached for 
     comment.
       Lockheed is pursuing a civil racketeering lawsuit against 
     Boeing in Orlando, Fla., that accuses Boeing of using 40,000 
     pages of stolen Lockheed documents to gain an unfair 
     advantage in a multibillion-dollar competition to provide 
     satellite launches to the Air Force.
       Druyun was not tied to that case originally. But after her 
     guilty plea last month, Lockheed sought Boeing e-mails and 
     other documents showing contacts between Boeing and Druyun 
     concerning both the rocket competition and several other 
     contracts she awarded to Boeing rather than Lockheed.
       In October 1998, the Air Force awarded 19 launches to 
     Boeing and seven to Lockheed.
       The Air Force cited Boeing's lower price-per-launch as a 
     major reason for giving Boeing so many launches.
       Lockheed said in last week's court filing that handwritten 
     notes of the September, 1998 meeting between Stonecipher, 
     Albaugh, Druyun, McKinney and other Air Force officials 
     suggest Boeing also received unfair treatment in the award of 
     those launches by receiving confidential Lockheed pricing 
     data.
       ``The fact that high-level Boeing officials discussed their 
     proposal strategy and Lockheed Martin's pricing with Ms. 
     Druyun shortly before the final (rocket) proposal submission 
     is damning,'' Lockheed said.
       The meeting notes, taken by David Schweikle, project 
     manager for Boeing's Delta IV rocket program, were, like the 
     Stonecipher e-mail, placed under seal.
       U.S. Magistrate Judge Karla Spaulding last week agreed to 
     let Lockheed lawyers question a Boeing representative about 
     communications with Druyun on six contract competitions, 
     including the rocket-launch contract.
       ``It may lead to admissible evidence about whether Boeing 
     had improperly acquired proprietary information of Lockheed 
     and others that it discussed with Druyun,'' the judge wrote.
       Boeing lawyers objected to the judge's order, and a hearing 
     was set for next month to resolve the objections.
       The Boeing attorneys, in court filings, said Lockheed's 
     request for information on Druyun is too broad, has nothing 
     to do with the case and is an attempt by Lockheed Martin to 
     concoct new complaints against Boeing.


                Chief weapons buyer for Air Force quits

       WASHINGTON--The Air Force's chief weapons buyer said 
     yesterday he is resigning to help clear the way for 
     promotions bottled up in Congress over a stalled $23.5 
     billion plan to acquire Boeing 767 tanker aircraft.
       Marvin Sambur said he had resigned as assistant Air Force 
     secretary for acquisition effective Jan. 20, or sooner should 
     President Bush's next choice for the job be confirmed before 
     then.
       ``It's becoming pretty apparent that if I stayed it would 
     be very difficult for the Air Force to have anybody 
     confirmed,'' Sambur said in a telephone interview.
       On Tuesday, Air Force Secretary James Roche resigned in a 
     move aides said was also designed to free up nominations of 
     officers whose Senate confirmations were held up by Armed 
     Services Committee member John McCain, R-Ariz.
       McCain had blocked a range of promotions over the Air Force 
     proposal to acquire 100 Boeing 767 aerial tankers, which he 
     slammed as a government handout to Boeing.
       Sambur was once the boss of Darleen Druyun, who admitted 
     improperly steering billions of dollars of Air Force 
     contracts to Boeing before joining the company as a

[[Page S11778]]

     $250,000-a-year vice president in January 2003.
       A former president and chief executive of ITT Defense, 
     Sambur oversees the Air Force's $37 billion procurement 
     budget.
                                  ____


                [The Wall Street Journal, Sept. 3, 2003]

                      John McCain's Flying Circus

       No one denies that the U.S. Air Force needs more refueling 
     tankers. The only questions are how and when to get them. 
     Senator John McCain calls the Pentagon's answer, a leasing 
     arrangement with Boeing, an unsavory example of the modern 
     ``military-industrial complex,'' a mistaken argument he will 
     no doubt pursue today at hearings before his Commerce 
     Committee. It's hard to overestimate the importance of these 
     flying gas stations. Long-range bombers make it to their 
     targets only because they can refuel in the air. It was our 
     tankers that enabled coalition aircraft to circle high above 
     Iraq's battlefields for hours, providing ground troops with 
     the capability to call in immediate, precision air strikes on 
     emerging targets. ``Our tanker force is what makes us a 
     global power'' is the way the Air Force chief of staff, 
     General John Jumper, puts it.
       Yet for all that power, America's tanker fleet is in sad 
     shape because the tankers are simply too old to keep flying. 
     The Pentagon is hoping to remedy this quickly by leasing the 
     tankers from Boeing, and three of the four relevant 
     committees in Congress have given their approval to the 
     contract. The fourth--the Senate Armed Services Committee--
     will hold hearings tomorrow. Senator McCain's Commerce 
     hearings today are his way of trying to preempt approval by 
     running up his own Jolly Roger.
       Let's hope he doesn't draw the fight out too long. The 
     average tanker is now more than 43 years old. During a visit 
     last year to Oklahoma's Tinker Air Base, then-Air Force 
     Secretary James Roche realized the urgency of the problem 
     when he peeled back the skin of a tanker being refurbished 
     and found the metal underneath disintegrating.
       Age isn't the only problem. Not only will the new Boeing 
     767s be able to refuel all planes in the military's 
     inventory--unlike the existing KC 135E's--they carry up to 
     20% more fuel and three times the cargo. And the leasing 
     arrangement used to get them to the Air Force is similar to 
     the way foreign militaries buy planes, selecting off-the-
     shelf technology and then signing a contract for rapid 
     delivery. This is how Israel and Singapore get the latest F-
     16s five years before the U.S. Air Force.
       We're as opposed to sweetheart deals as anyone. But it 
     seems to have escaped Senator McCain's notice that Boeing's 
     main competitor here, the European consortium that produces 
     Airbus, virtually defines corporate welfare. And so far as we 
     can tell, the e-mails between Boeing, the Pentagon and the 
     Air Force released by his committee last week seem to show 
     only that Boeing was lobbying hard for a multibillion-dollar 
     deal (surprise!) and that cost was a big concern.
       In short, the real issue the Senate Armed Services 
     Committee needs to zero in on here isn't just overall 
     lifetime cost but value for money. The Air Force needs 
     tankers now, and the leasing arrangement was deemed the way 
     to get tankers into its hands most expeditiously, not least 
     because it bypasses procurement procedures that could stretch 
     out a buying decision for years.
       Senator McCain and other critics like to talk about what he 
     says are the billions more that a leasing deal will cost over 
     buying these birds outright. Leaving aside the huge dispute 
     over the price tag, let's hope the Armed Services Committee 
     considers the costs our military might incur by not getting 
     these tankers as soon as possible.
                                  ____


            USAF e-mails on Boeing 767 Tanker Lease Proposal


                       Originator, Date, Subject

       Roche, August 07, 2002, FW: Crosby Finds a Home at EADS; 
     Bodie, Sept 04, 2002, Re: Fw: Defense Week Daily Update: 
     EADS: Our Tanker Offer Cost Less Than Boeing's; Druyun, Sept 
     05, 2002, Our friend; Hodges, June 20, 2003, FW: KC-767 
     ``Savings'' for comment & Courtesy Copy of Memo; Wynne, June 
     23, 2003, Tankers; Weaver, May 7, 2003, 767 Lease; Druyun, 
     Oct 9, 2002, Tanker Leasing; Calbis, Nov 7, 2001, CBO has 
     questions about your scoring of the tankers; Roche, Friday, 
     November 28, 2003, RE: Tankers; Roche, August 8, 2002, Re: 
     hello?
       Albaugh, Wednesday, September 18, 2002 8:03 PM, RE: Marvin 
     Sambur; Ellis, Tuesday, December 17, 2002 9:36 PM, notes from 
     jim Albaugh's meetings; Albaugh, Monday, June 23, 2003 3:00 
     PM, FW: Roche mtg 23 Jun 03; Wynne, Tuesday, July 08, 2003, 
     Re: 767 and DepSecDef; Roche, Wednesday, April 16, 2003, RE: 
     Tankers; Roche, Nov 19, 2002, 767 Lease; Roche, Monday, 
     December 17, 2001 7:24pm, Re: 767 Leasing; Jumper, Tuesday, 
     February 25, 2003 8:58pm, Re: Offsets for tanker lease; 
     Wynne, Wednesday, June 25, 2003, RE: OSD(C) AND 767 LEASE; 
     Lemkin, June 25, 2003, OSD(C) and 767 Lease.
       Roche, Tuesday, July 08, 2003 9:44 pm, Re: Footnote; Roche, 
     Tuesday, July 08, 2003, Lease; Roche, Wednesday, September 
     03, 2003, Re: Ken Kreig ltr; Wynne, Wednesday, July 09, 2003, 
     RE: FW: Footnote; Cleveland, 15 May 2003, 1913, Re: Interview 
     at NG; Jumper, June 22, 2002, RE: CNBC Interview--Tanker 
     Recapitalization; Sambur, June 17, 2003, FW: USAF Green 
     Aircraft Pricing; Sambur, October 10, 2002, RE: Tanker 
     Leasing; Essex, August 03, 2002, FW: Potential OMB Problems 
     with 767 Lease; Sambur, October 21, 2002, 767 meeting with 
     OMB.
       Sambur, September 11, 2002, 767 Tanker justification; 
     Sambur, July 25, 2003, Re: SASC Tanker Lease Hearing; Sambur, 
     November 19, 2003, FW: Tankers; Zakheim, November 25, 2002, 
     RE: KC-767 Lease Delay; Wynne, July 08, 2003, RE: Footnote; 
     Walker, August 21, 2003, Re: Revised OMB Circular A-11; 
     Sambur, November 21, 2003, FW: 767 Update; Walker, Nov. 26, 
     2002, More Updates from GC; Wynne, June 24, 2003, Meeting; 
     Wynne, July 17, 2003, Good Luck.
       Wynne, November 01, 2003, RE: Two Issues--Tankers and Ship 
     Funding; Burkhardt & Associates, May 3, 2002, WSJ; Roche, May 
     14, 2002, RE: Call from Boeing; Bodie, April 25, 2002, RE: US 
     News; Roche, December 13, 2001, Fw: 767 lease; Roche, 
     December 13, 2001, RE: Several items; Roche, March 30, 2002, 
     RE: Tanker story; Custer, March 30, 2002, NDAA; Jumper, April 
     9, 2002, RE: Tanker Article; Roche, April 28, 2003, RE:.
       Bodie, January 2, 2002, RE: Dear Bob; Aldridge, May 16, 
     2003, RE: Boeing; Roche, May 13, 2001, RE: 767 lease; Bodie, 
     Friday, June 21, 2002 11:26 AM, RE: CNBC Interview--Tanker 
     Recapitalization; Druyun, Wednesday, October 09, 2002 8:17 
     AM, OSD BRIEF TO LEASING WORK GROUP; Wynne, Tuesday, Jul 08, 
     2003, Re: FW: Footnote; Sambur, Tuesday, July 08, 2003 9:58 
     PM, Fw: Tanker Leasing Report to the Congress; Sambur, 
     Tuesday, August 26, 2003 7:59 AM, $2B Issue with PA&E 
     Aldridge, Monday, November, 04, 2002 1:22 PM, Tankers and B-
     52's; Spruill, Tuesday, November 12, 2002 9:22 PM, RE: Tanker 
     Leasing.
                                  ____

       Some of the following records are transcriptions made by 
     Senate staff of original documents provided by the Department 
     of Defense.

            USAF e-mails on Boeing 767 Tanker Lease Proposal

     From: James Roche
     To: William Bodie
     Date: August 07, 2002
     Subject: FW: Crosby Finds a Home at EADS

       Well, well. We will have fun with Airbus!
                                                              Jim.

     From: Miriam Thorin
     To: James Roche
     Date: August 07, 2002
     Subject: FW: Crosby Finds a Home at EADS

       Paris.--European Aeronautic Defense & Space Co. NV (N. EAD) 
     said Wednesday that it has appointed Ralph Crosby to head its 
     North American operation. Until January, Crosby was president 
     of Northrop Grumman's Integrated Systems division, EADS said 
     in a statement.
       ``As our senior official in the U.S., (Crosby) will oversee 
     our efforts to expand our business, develop industrial 
     partnerships, and ensure strong customer relationships in 
     this critical market,'' EADS said.
       Crosby will assume his position on Sept. 1. Manfred von 
     Nordheim, EADS's current top representative in the U.S., will 
     continue to work as a senior adviser, the company said.
           Cordially,
                                                             Alex.

     From: Bill Bodie
     To: James Roche
     Date: Sept 04, 2002
     Subj: Re: Fw: Defense Week Daily Update: EADS: Our Tanker 
         Offer Cost Less Than Boeing's

       We don't have to turn the other cheek, you know. I'm ready 
     to tell the truth about Airbus's boom, footprint, and 
     financial shortcoming. But maybe we should sleep on it.
                                                       W.C. Bodie,
           Special Asst. to the Secretary and Director, Air Force 
                                                   Communications.

     From: James Roche
     To: Bill Bodie
     Date: Sept 04, 2002
     Subj: Re: Fw: Defense Week Daily Update: EADS: Our Tanker 
         Offer Cost Less Than Boeing's

     Importance: High

       No, Sir, save it and blow him away. He admits that they 
     were not technically qualified! And, we keep their record of 
     bribes as our trump card! Jim.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: Darleen Druyun
     To: James Roche
     Date: Sept 05, 2002
     Subj: Our friend

       I read with disgust the article on Airbus tankers from the 
     new EADS CEO of North America. What BS . . . should not have 
     been surprised at the slime . . . his day of reckoning will 
     come hopefully.

     From: James Roche
     Date: Sept 05, 2002
     Subj: Re: Our friend

       Oy. I agree. I had hoped you would have stayed and tortured 
     him slowly over the next few years until EADS got rid of him! 
     Jim.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: Williams Hodges
     To: Marvin Sambur
     CC: John Corley; Mark Murphy; Mark Beierle; Stephen Gray; 
         James T. Rivard; Cheryl Allen; Nancy Lively; Allan 
         Haenisch
     Date: 6/20/2003
     Subj: FW: KC-767 ``Savings'' for comment & Courtesy Copy of 
         Memo

       Dr. Sambur: I received a call from Dave Trybula, who works 
     for Rick Burke in

[[Page S11779]]

     PA&E. HE stated he had just delivered a memo to Dr. Roche's 
     office. I asked him if he could share what they had sent and 
     he attached the memo in two files, below.
       This was a total surprise and not ever mentioned in any of 
     our discussions with Dr. Spruill or Dr. Schroeder. It appears 
     that they have simply listed all their positions on the 
     report and none of the accommodations reach with the leasing 
     working group. Apparently, they no longer want to be part of 
     the process.
       I propose that we provide you with an email containing our 
     counterpoints on their assertions, followed by a proposed 
     response from Dr. Roche back to PA&E.
           VR,
                                                            Wayne.

     From: Marvin Sambur
     To: James Roche
     Date: June 20, 2003
     Subj: FW: KC-767 ``Savings'' for comment & Courtesy Copy of 
         Memo

       Boss: This is getting ridiculous!!!!
                                                             Marv.

     From: James Roche
     To: Michael Wynne
     CC: Marvin Sambur
     Date: June 22, 2003
     Subj: FW: KC-767 ``Savings'' for comment & Courtesy copy of 
         memo

       Mike: Ever since Pete left, the bureaucrats who opposed the 
     767 lease have come out of the woodwork to try to kill it-
     yet, once again. Mike, I won't sign a letter that makes the 
     case that we shouldn't lease the planes. Ken Krieg's memo 
     attached is a cheap shot, and I'm sure has already been 
     delivered to the enemies of the lease on the Hill. It was a 
     process foul. And Ken needs to be made aware of that BY YOU!
       I can't control the corporate staff on acquisition issues. 
     Mike, this is their way of asserting dominance over you. I 
     know this sounds wild, but animals are animals. Pete had 
     beaten them down. Now, they are taking you on. I'm sorry. 
     Expecting professional behavior from them is something I gave 
     up on a while back. Among other things, they are about to 
     cause us to embarrass SecDef, who having approved the lease, 
     will now have to explain why his staff is destroying the case 
     for it. I'll do whatever I can to help you, Mike, but it's 
     your job to get the corporate staff under control. If not 
     now, then they will overrun you whenever you ``don't behave'' 
     according to their desires. This is the same game they have 
     played for years. They and OMB are trying to set the Air 
     Force up to be destroyed by Sen McCain WITH OSD AND OMB 
     ARGUMENTS. As you might imagine, I won't give them the 
     chance, but I will make it clear who is responsible to Don. I 
     refuse to wear my flack jacket backwards!
       Sorry, Shipmate. Jim.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: Michael Wynne
     To: James Roche
     CC: Marvin Sambur
     Date: June 23, 2003
     Subj: RE: KC-767 ``Savings'' For comment & Courtesy Copy of 
         Memo

       Jim: Thanks for your note--I see this as an OSD discipline 
     problem myself. I will be taking it to the Secretary as 
     well--better he hear it from two sources.
                                                             Mike.

     From: Michael Wynne
     To: Ken Krieg, PA&E
     Date: June 23, 2003
     Subj: Tankers

       Ken: If the purpose of your note is to run acquisition from 
     PA&E, we have a problem that needs immediate resolution. I 
     have plenty of problems, but being `fragged' didn't seem to 
     be one of them, now I worry. If the SecDef wants to kill this 
     he will, so far not--your note was not helpful to either one 
     of us. I will continue to make decisions that have the 
     potential for successful execution of the lease unless SecDef 
     waves me off.
           Best Regards,
                                                             Mike.

     From: Ken Krieg, PA&E
     To: Michael Wynne
     Date: June 23, 2003
     Subj: RE: Tankers

       Mike: That's not what I intended and I may have used the 
     wrong instrument to communicate my concerns. I just want to 
     get together with you and Jim to make sure you understand 
     what we are worried about. That's why I asked for us to get 
     together this afternoon.
                                                              KJK.

     From: Ken Krieg, PA&E
     To: James Roche
     Date: June 23, 2003
     Subj: FW: tankers

       Jim: Understand from Doc that you are as mad as Mike. I am 
     not trying to walk back anything. I am trying to get the 
     strategy to drive the deal; the deal and contract to set the 
     numbers; the numbers to be reopened in the report without a 
     lot of hype.
       Probably should have called you but I will explain later.
       Want to get together with you and Mike to clear air.
       KJK.
                                                        Ken Krieg,
            Director, Program Analysis & Evaluation and Executive 
                              Secretary, Senior Executive Council.

     From: James Roche
     To: Ken Krieg, PA&E
     Date: June 23, 2003
     Subj: RE: Tankers

       Kenny, I love you, and you know that. I think you have been 
     had by some members of the famous PA&E staff. You never 
     should have put what you put in writing. It will now be used 
     against me and Don Rumsfeld.
       Jim.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: Paul Weaver
     To: James Roche
     Date: May 7, 2003
     Subj: 767 Lease

       Mr. Secretary: Rudy just called me and said that Marv 
     Sambur was getting beat up by Mike Wynn again concerning the 
     $125M dollar number per aircraft. Rudy would like to know if 
     he needs to do anything like calling in the big guns to help 
     out. I told him I would query you to get your advice.
                                                        God bless,
                                                             Paul.

     From: Jim Roche
     To: Paul Weaver
     Date: May 07, 2003
     Subj: Re: 767 lease

       It's time for the big guns to quash Wynne! Boeing won't 
     accept such a dumb contract form and price, and Wynne needs 
     to ``pay'' the appropriate price! Jim.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: Darleen Druyun
     To: James Roche; Marvin Sambur
     Date: Oct 9, 2002
     Subject: Tanker Leasing

       I would like to informally brief Bill Schneider on tanker 
     leasing when he gets back from Germany. I had briefed him 
     during the transition about the idea of leasing as a viable 
     acquisition alternative. He has apparently had a positive 
     conversation with Wolfowitz on leasing and is interested in 
     quietly helping us. If you give a nod we will use the same 
     charts we used to brief Gingrich which was very positively 
     received by him.

     From: James Roche
     To: Darleen Druyun
     Date: Oct 9, 2002
     Subject: Re: Tanker leasing 
       Please do. Thanks much. Jim.
                                               Dr. James G. Roche.

     From: Philip T. Calbis (OMB)
     To: John McClelland, Rob Goldberg
     Date: Nov 7, 2001
     Subj: CBO has questions about your scoring of the tankers.

       John-Joanne Vines from CBO called with questions about your 
     scoring of the tankers. Specifically how did you get to the 
     18 billion? Her analysis shows the NPV closer to $20 billion.
       I called her back after talking it over with Rob and found 
     out that she had a copy of your spreadsheet from the Senate 
     budget committee folks. She was meeting with Boeing and the 
     AF this afternoon. I asked her not to share your table with 
     them (she said no problem because she wasn't ready to share 
     her numbers with them either).
       She would like for you to call her tomorrow at 202-226-
     5707. Apparently, the Senate budget committee is pressuring 
     her to see things the AF way so Conrad can do Stevens a 
     favor. So, talk it over with Rob and give her a call right 
     back.

     From: Jim Roche
     To: Robin Cleveland
     Sent: 9 May 2003 1712
     Subj: Peter Cleveland Resume & Cover letter attached for 
         export

       Be well. Smile. Give tankers now (Oops, did I say that? My 
     new deal is terrific.) :) Jim.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: Jim Roche
     To: Stephen Dyslas Northrup Grumman
     Sent: 9 May 2003 1620
     Subj: Peter Cleveland Resume and cover letter attached for 
         export/import compliance attorney (DC) position-021495

       Steve: I know this guy. He is good. His sister (Robin) is 
     in charge of defense and intel at OMB. We used to work 
     together in Senate staff. If Peter Cleveland looks good to 
     you, PLS add my endorsement. Be well. I've let Rummy con me 
     one more time! Army! Best to Alice.
                                                              Jim.

     From: Robin Cleveland
     To: Jim Roche
     Sent: 9 May 2003 1549
     Subj: Peter Cleveland resume and cover letter/Import 
         compliance attorney (DC) position-02 1495

       Jim: This is my brother's stuff. I would appreciate 
     anything you can do to help with NG. He is an incredibly hard 
     working, disciplined guy--worked full time with two little 
     kids putting himself through law school at night. I would be 
     grateful. Thanks very much, Robin.

     From: Robin Cleveland
     To: Peter Cleveland
     Sent: 15 May 2003 1913
     Subj: Re: Interview at NG

       Great hope it works before the tanker leasing issue get 
     fouled up.

     From: James Roche SAF/OS
     To: Peter Teets Civ SAF/US
     Date: Friday, November 28, 2003
     Subj: RE: Tankers

       Thanks, Pete. We can discuss on Monday.
                                                              Jim.


[[Page S11780]]


     From: Peter Teets SAF/US
     To: James Roche SAF/OS
     Date: 11/27/2003
     Subj: Tankers

       Jim: I think it is important for you to know all I know 
     about the situation surrounding the tankers. I sat in for you 
     at the SecDef staff meeting last Tuesday. As we went around 
     the table, Joe Schmitz (IG) mentioned the Boeing dismissal of 
     Sears and Druyun. The SecDef then asked if in light of that 
     should we take a second look at her involvement in any tanker 
     lease related matters in order to deflect possible criticism 
     from the SASC and unfavorable publicity. I said I thought 
     that was a good idea, and that we (the Air Force) would do 
     so. No further discussion on the subject occurred at the 
     staff meeting. After the staff meeting I scheduled short 
     separate meetings with Marv Sambur and Mary Walker for 
     Tuesday afternoon following my return from a meeting at CIA. 
     When I returned, I learned that Marv could not meet with me 
     at the scheduled time because he was in Mike Wynne's office 
     discussing Darlene's involvement with tankers. I then met 
     with Mary and asked her to think through the Darlene 
     situation, plus another matter regarding proper packaging of 
     material on the AFA situation that Schmitz had said was 
     required to be delivered to the SASC. Late Tuesday afternoon 
     I then talked to Marv Sambur and got his assurance that a 
     thorough review of the Darlene situation had been completed 
     and that there was no way Darlene had any influence on our 
     current plan for tankers. Furthermore, Marv said that a 
     letter had been prepared for the DepSecDef to send over to 
     the SASC indicating same, and notifying them of our intent to 
     proceed. At that point, I thought the issue was resolved. On 
     Wednesday morning I read the Wash Post article quoting Sec 
     Rumsfeld as saying he had asked his staff to do a review of 
     the tanker deal. I sent Marv and e-mail offering any help I 
     could provide, and he responded with thanks, but it was clear 
     that this situation had once again gotten out of control. I 
     am sorry to report the news to you, but felt you needed the 
     whole story as it unfolded.
           Best Regards,
                                                             Pete.

     From: Wynne, Michael Mr. OSD-ATL
     To: Roche, James Dr. SAF/OS
     Date: Tuesday, July 08, 2003
     Subj: Re: 767 and DepSecDef

       Jim: I am hoping this is about unity of command. 
     Negotiations with OMB are down to a footnote. I've sent a 
     stand-off note to Sen McCain and offered a meeting. 
     Everyone's nervous as Boss testifies to SASC tomorrow.
                                                             Mike.

     From: Roche, James Dr. SAF/OS
     To: Wynne, Michael, Mr. OSD-ATL
     Date: Tuesday, July 08, 2003
     Subj: 767 and DepSecDef

       Good friend and fellow prisoner of the Corporate Staff, 
     please keep in mind, and do tell Paul, that neither you nor I 
     will sign a stupid letter to the Congress regarding the KC-
     767's. Last time I checked, you have an IQ greater than room 
     temperature--and, so do I. PA&E and OMB can kill the deal and 
     make Pete Aldridge and Don Rumsfeld look like dopes. But, we 
     shouldn't help them!
       As you can tell, I finally got some time on my boat, and am 
     feeling like my hero, Bull Halsey: Strike Fast, Strike Hard, 
     Strike Often! Jim.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: Roche, James Dr. SAF/OS
     To: Wynne, Michael Mr. OSD-ATL
     Date: Wednesday, April 16, 2003
     Subj: Re: Tankers

       Sounds good, Mike. Jim.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: Wynne, Michael Mr OSD-ATL
     To: Roche, James Dr. SAF/OS
     Date: Wed Apr 16, 2003
     Subj: Re: Tankers

       Jim: Thanks for the input--Ralph was in to see me a few 
     weeks ago, to touch base. I think I will keep this in that 
     same vein; about if there is anything EADS can do over the 
     near future to keep their long term prospects open. 
     Cancelling would not be as soft.
                                                             Mike.
     From: Roche, James Dr SAF/OS
     To: Wynne, Michael Mr. OSD-ATL
     Date: Wednesday, April 16, 2003
     Subj: Re: Tankers

       Mike: One more thing that I forgot to pass to you on the 
     phone: Don is rarely pissed at the French. Neither you nor I 
     can attend the Paris Air Show, we are getting into a possible 
     flap over inviting the Chief of the FAF to a gathering next 
     September, and you are inviting them in for lunch? Hello? 
     Within minutes of the invite, Crosby most likely used your 
     call to butter this personal croissant in Paris, and EADS 
     would then inform the Que d'Orsay in seconds. Be careful! 
     Maybe you should consider postponing your lunch . . . Jim.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: Wynne, Michael Mr OSD-ATL
     To: Roche, James Dr SAF/OS; Sambur, Marvin Dr SAF/AQ
     CC: Aldridge, Pete Hon. OSD-ATL
     Date: Wed Apr 16, 2003
     Subject: Re: Tankers

       Jim: I have not told Ralph of the meeting's purpose, as I 
     wanted your feedback. But where will the competition come 
     from?

                                                             Mike.
     From: Roche, James Dr. SAF/OS
     To: Wynne, Michael, Mr. OSD-ATL; Sambur, Marvin Dr. SAF/AQ
     CC: Aldridge, Pete Hon. OSD-ATL
     Date: Wednesday, April 16, 2003
     Subject: Re: Tankers

       Mike, you must be out of your mind!!! Crosby has lots of 
     baggage, as does Airbus. We won't be happy with your doing 
     this!
       JGR.
                                               Dr. James G. Roche,
                                          Secretary, US Air Force.

     From: Wynne, Michael, Mr. OSD-ATL
     To: Sambur, Marvin Dr. SAF/AQ; Roche, James Dr. SAF/OS
     Date: Wednesday, April 16, 2003
     Subject: FW: tankers

       Jim, Marv; I've invited Ralph Crosby in for lunch. Ralph is 
     the President EAD's US. I am going to ask him how much a 
     proposal would cost. They came in a couple of weeks ago and 
     offered to build the majority here in America. You are 
     welcome to attend, though, it may be best to let me in my 
     present position do the probing. I will share with you, as I 
     have in the other case, any findings. I'd suggest that this 
     be held quietly, but I did want you to be aware. I am not 
     sure where this will lead, but the benefits of competition 
     may be revealing.
           Best,
                                                             Mike.

     From: Wynne, Michael Mr. OSD-ATL
     To: Sambur, Marvin Dr. SAF/AQ
     Date: Wednesday, April 16, 2003
     Subject: Tankers

       Marv; Some advance work for FY05 budgeting is in order. I 
     suggest that you begin to probe whether there's sufficient 
     funding to start a multi-year late in FY04 and in earnest in 
     FY05. Not that we are done yet, IDA may surface changes that 
     make it acceptable, but some of the arguments that were 
     tabled make the case for tanker re-cap compelling.
       If I had some spare change hanging around, I'd give another 
     supplier enough money to make a proposal for this as well. 
     I'm not saying to buy anything other than a proposal. But, I 
     think the leverage from that `spare change' would be 
     enormous. For Boeing, the risk of losing the US tanker 
     Franchise, no matter what our final intent is would be too 
     embarrassing. I know the opposition would be vocal as well, 
     but with the low probability of success, I think paying to 
     prepare is fair. If chosen we could deduct it from the final 
     deal.
       While these are idle thoughts for now, the discontent 
     within the administration for what they perceive Boeing's 
     response for assistance was is not good, and would support 
     this contrary approach.
           Best,
                                                             Mike.

     From: James Roche
     To: William H Swanson
     Date: August 8, 2002
     Subject: Re: hello?

       Oh, really. Mine is probably at ``station 13'' while the 
     gang goes on August vacation. When I see it in November, I 
     hope it's all there--and no empty wine bottles in the doors! 
     Be well.
                                                              Jim.

     From: William H Swanson
     To: James Roche
     Date: August 08, 2002
     Subject: Re: Hello?

       Jim: Understand. Move explains why you and I had issues in 
     our previous assignments.
       Still no red rocket on west coast. It has sat in DC for 
     2\1/2\ weeks waiting on transportation. I almost called to 
     borrow (pay for) one of your transporters. It is finally now 
     on the road and I will see it next Friday. This has been 
     torture. Yours will be here before I get to see mine!
                                                             Bill.

     From: James Roche
     To: William H Swanson
     Date: August 08, 2002
     Subject: Re: Hello?

       Right. Privately between us: Go Boeing! The fools in Paris 
     and Berlin never did their homework. And, Ralphie is the CEO 
     and Chairman of a marketing firm, for that's all there is to 
     EADS, North America. The AF has problems with EADS on a 
     number of levels. The widespread feelings about Crosby in the 
     Air Staff, Jumper especially, will only make their life more 
     difficult. Smiles.
       JGR.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: William H Swanson
     To: James Roche
     Date: August 08, 2002
     Subject: Re: Hello?

       Jim: Sent out the action will try and have late afternoon 
     or first thing Friday morning.
       Did you see the notice on Ralph and EADS?
                                                             Bill.
     From: James Roche
     To: William H Swanson
     Date: August 08, 2002
     Subject: Hello?

       Bill, BAE and ATFLIR? Hello?
                                                              Jim.


[[Page S11781]]


     From: Jumper, John, Gen AF/CC
     To: Roche, James Dr. SAF/OS
     Date: Tuesday, February 25, 2003 8:58pm
     Subj: Re: Offsets for tanker lease

       Good, thanks.
                                                             John.

     From: Roche, James Dr. SAF/OS
     To: Jumper, John Gen AF/CC
     Date: Tuesday, February 25, 2003 8:57pm
     Subj: Re: Offsets for Tanker lease

       Good idea. I'll be honored to join you.
                                                              Jim.

                                                  Dr. James Roche,
                                       Secretary of the Air Force.

     From: Jumper, John, Gen AF/CC
     To: Roche, James Dr. SAF/OS
     Date: Tue. Feb 25, 2003
     Subj: Re: Offsets for tanker lease

       Boss, there may be a trap in letting the corporate staff 
     diddle us on the margins of what they will or won't allow. We 
     should consider you and me taking this directly to Pete and 
     Dov, around the corporate staff.
                                                             John.

     From: Sambur, Marvin Dr. SAF/AQ
     To: Roche, James Dr. SAF/OS; Jumper John Gen AF/CC
     Date: Tuesday, February 25, 2003
     Subj: Offsets for tanker lease

       Boss, Chief: We are getting tremendous pressure to show our 
     offsets for the Tanker lease. As I explained to you in a 
     previous email, the offset or affordability issue is not as 
     big a deal as Dov makes it out to be. The Chief has seen the 
     details and the full details will be briefed to you on 
     Wednesday at 4pm. The issue is that Aldridge wants a 
     briefings by Dr. Spruill (co chair of the leasing committee) 
     at 8:30 am tomorrow and Zakheim wants a briefing at 3:30 pm. 
     Since we have a good story to tell, I think it would only 
     cause unnecessary irritation if we refuse to give them the 
     details until you are fully briefed. Is it OK to allow BG 
     Johns with Spruill to give the briefing to Aldridge and 
     Zakheim before you see the full details. The Chief had no 
     issues and as I explained to you the OSD hot points are in 
     the 09 time frame and involve an unknown bomber and funding 
     for LAIRCM.
       Thanks!
                                                             Marv.
     From: James Roche
     To: Pete Aldridge
     CC: Gen. John Jumper; Marvin Sambur; Bill Bodie
     Date: Nov 19, 2002
     Subject: 767 Lease

       Pete, old Buddy, you have been our strongest supporter on 
     the issue of the lease. I now hear that your staff is telling 
     us that you are weakening. Please don't. Here is some food 
     for thought:
       (1) Regardless of OMB, the deal is a good one for the 
     taxpayer.
       (2) Every time we come forward with something good for the 
     taxpayer, the bureaucrats (including yours) feel that they 
     have to fight it (job security?)
       (3) To delay for two years to do an AOA is simply silly. It 
     just means two more years of wasted repair costs on the E 
     models; a waste of taxpayers' money to some beltway bandit; 
     more bureaucratic delays by PA&E and an end which is 
     predictable.
       (4) Since neither ships, trucks, or tiny planes can serve 
     as tankers, we will be looking at big planes. Guess what?
       We're already there. We will waste money and have nothing 
     to show for it.
       (5) Hey, we can extend the life of the E's and re-engine 
     them! We'll that doesn't pass Grant's lieutenant's test: it 
     means we will be flying 80 year old planes in a few years!!!! 
     Average age is now between 42 and 44 years. Re-engining won't 
     solve the inherent catalytic corrosion problem. More waste of 
     money.
       (6) Gee, why didn't we for 50 or 60 or 70 year old Air 
     Force Ones? How many of our bureaucrats fly in such old 
     planes? I'm getting used to some in their late 40s, but I'm 
     not so picky! But, why don't we make the Navy sail 60 year 
     old destroyers? Or submarines? Because it's dumb.
       (7) If we wait, there may not be a 767 line! Hey, can we 
     covert used ones. Here we go again. We can waste money with 
     half measurers that are penny wise and pound foolish. Why not 
     do the same for ships? OK, so we'll be forced to buy French 
     airplanes.
       (8) To kill this idea in OSD is proof that there may be 
     words like ``acquisition reform,'' but they are hollow. The 
     bureaucrats want to keep doing things the same old way, 
     adding little value but lots of costs.
       I can only keep my sanity by remembering Andy's advice to 
     me years ago: ``there are limits to the stupidity any one man 
     can prevent.'' Off to Okinawa! Jim.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: Bill Bodie
     To: Jim Roche
     Date: Nov 20, 2002
     Subject: Re: 767 Lease

       Good for you, boss. Aldridge may deny he's been weakening, 
     but the smoke signals are thick. Aldridge interviewed with 
     Anne Marie yesterday, and although he wouldn't comment on 
     specifics of any deal and was keeping an open mind, he 
     indicated that in general terms he would have concerns about 
     leasing when/if buying was cheaper. That doesn't jibe with 
     his previous support for the lease from a NPV/cash flow 
     management perspective. In addition, the spores seem to be 
     pushing a ``what's the rush?'' line: buying is cheaper (we 
     ``exaggerate'' the purchase cost of a green 767), therefore 
     better; such a large expenditure requires more ``rigorous 
     analysis'' than the back-of-the-envelope assertions by the 
     AF, hence an AOA; the AF hasn't POM'ed for the lease, so how 
     serious can we be? There is no ``urgent'' need, because the 
     AF is starting to retire the E's next year even without an 
     immediate replacement, so why can't we be more deliberative? 
     Boeing will still be there, making airplanes, so what's the 
     rush? Anyway, Airbus could make planes with enough American 
     content if need be. I rebutted all these arguments with 
     Jaymie (as you did with Pete), but we might be in the `power' 
     phase with OSD on this issue. If anyone can talk sense to 
     Aldridge, however, it's you.

     From: James Roche
     To: Bill Bodie
     Date: Nov 20, 2003
     Subj: Re: 767 lease
     Importance: high

       Right. I'm relaxed on this one. They have to take the 
     bureaucratic position. Jim.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: Roche, James Dr. SAF/OS
     To: Druyun, Darleen, SAF/AQ
     Date: Monday, December 17, 2001 7:24pm
     Subj: Re: 767 Leasing

       Darleen, thanks much. I'd like for us not to be embarrassed 
     on the Third Floor. Also, we will have to see what the final 
     language looks like. I'll be interested in the numbers, and 
     whether our resident DeLoitte partner (Nelson) agrees. Jim.
                                               Dr. James G. Roche,
                                                            SECAF.

     From: Wynne, Michael Mr. OSD-ATL
     To: Roche, James Dr. SAF/OS
     Date: Wednesday, June 25, 2003
     Subject: RE: OSD(C) AND 767 LEASE

       Usually opposition is loudest away from the decision 
     maker--I think progress towards the door will crisp up the 
     arguments, and allow the release. Keep the team MOOSHHING 
     forward.
           Best,
                                                             Mike.
     From: Roche, James Dr. SAF/OS
     To: Wynne, Michael, MR. OSD-ATL
     Date: Wednesday, June 25, 2003
     Subject: FW: OSD(C) and 767 Lease

       Mike: And, here I thought Stan and the Boys were under 
     control!
       You have more work to do.
       Jim.
                                                   James G. Roche,
                                       Secretary of the Air Force.

     From: Lemkin, Bruce S, SES, SAF/FM
     To: Roche, James Dr. SAF/OS; Sambur, Marvin Dr. SAF/AQ
     CC: Montelongo, Michael, Civ, SAF/FM
     Date: Wednesday, June 25, 2003
     Subject: OSD(C) and 767 Lease

       Mr. Secretary and Marv: At this morning's Dov Zakheim 
     meeting with Service FMs, Dov stated that he will not agree 
     to including an AF position in the Report to Congress that is 
     different from the OSD position. He directed me to ``tell Jim 
     and Marv'' that he intends to send SECDEF a memo stating 
     this. Szemborski piped up that PA&E has ``formally non-
     concurred'' to SECDEF.
       After the meeting, I got hold of the Leasing Panel co-
     chair, Wayne Schroeder, and told him that our position is 
     that SECDEF has approved the lease-how can one or more of his 
     staff ``non-concur?''--so, now, it is our obligation to work 
     together to submit a Report to Congress that uncategorically 
     supports the lease.
       Marv--We in FM are standing by to continue to assist to 
     break this free. Let me know how else we can help.
                                                               VR,
                                                            Bruce.

     From: Bruce Lemkin [Principal Deputy Assistant Secretary AF, 
         Financial Management]
     To: James Roche; Marvin Sambur
     CC: Michael Montelongo
     Date: June 25, 2003
     Subj: OSD(C) and 767 Lease

       Mr. Secretary and Marv: At this morning's Dov Zakheim 
     meeting with Service FMs, Dov stated that he will not agree 
     to including and AF position in the Report to Congress that 
     is different from the OSD position. He directed me to ``tell 
     Jim and Marv'' that he intends to send SECDEF a memo stating 
     this. Szemborski piped up that PA&E has ``formally non-
     concurred'' to SECDEF.
       After the meeting, I got hold of the Leasing Panel co-
     chair,
       Wayne Schroeder, and told him that our position is that 
     SECDEF has approved the lease-how can one or more of his 
     staff ``non- concur?''--so, now it is our obligation to work 
     together to submit a report that uncategorically supports the 
     lease.
       Marv--We in FM are standing by to continue to assist to 
     break this free. Let me know how else we can help.

                                                               VR,
                                                            Bruce.

     From: Marvin Sambur
     To: Bruce Lemkin; James Roche
     CC: Michael Montelongo
     Date: June 25, 2003
     Subj: RE: OSD(C) and 767 Lease

       Bruce: We have made every compromise possible. I do not 
     understand Szembroski's position. I spoke to his boss this 
     morning and I thought they were rewriting the non-concur. In 
     any event, we are submitting the report this afternoon. I 
     added a line the OMB wanted (lease decision was predominantly 
     made due to schedule). However, I am not moving off the 
     position that the fair market

[[Page S11782]]

     purchase price is $138.4 (not $131M which requires that we 
     give them the money 4 years ahead of delivery) and that the 
     lease is a wash art purchasing from a financial point of 
     view. I will not give your enemies the tools to bury us!
                                                             Marv.

     From: Roche, James Dr SAF/OS
     To: Sambur, Marvin DR SAF/AQ
     Date: Tuesday, July 08, 2003 9:44pm
     Subj: Re: Footnote

       Marv, what about my just adding my language? Why not? It's 
     my letter. Jim.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: Sambur Marvin Dr SAF/AQ
     To: Roche James Dr SAF/OS
     Date: Tue Jul 08 2003
     Subj: Re: Footnote

       Boss: Our introduction makes that point that the lease is 
     the fastest way to get tankers given our funding constraints. 
     What they are forcing us to say is that IF congress gave us 
     permission to PURCHASE under the same MYP terms as the lease, 
     then the lease is DUMB financially.
       Robin wanted it in the text and Mike got her to accept it 
     as a footnote. Wynne is not willing to go further. My point 
     is that Mike has tossed the bomb back to us in a take it or 
     leave it terms. He claims that we will still win and our 
     enemies know about this already. I spoke to Dicks last week 
     and he told me to hold firm and not to go along with Robin. I 
     want to check again.
                                                             Marv.

     From: Roche, James Dr. SAF/OS
     To: Durnan, Jaymie CIV OSD
     Date: Tuesday, July 08, 2003
     CC: Bodie William C Civ SAF/OS
     Subj: Lease

       Jaymie, Mike Wynne has fallen for Cleveland's line that our 
     letter must show the bogus calculation which is NPV negative 
     by $1.9 billion.
       Why bogus? If we had the budget, we wouldn't need to turn 
     to a lease. But, we don't. Thus, to assume that it exists 
     (wrong premise), and then to assume the Congress passed 
     legislation which it didn't, and then to condemn ourselves in 
     writing by stating the calculation based on a fantasy simply 
     is crazy. It is a bureaucratic trick to make a fool out of 
     Don as well as the Air Force. All this was ``resolved'' by 
     Pete Aldridge before he left. To quote him: ``We need to go 
     forward with DoD's position. If OMB wants to comment, let 
     them.''
       Point: we are running aground because PA&E and OMB want me 
     to sign a suicide note. BUT I WILL NOT. This whole drill has 
     gotten out of hand! Jim.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: Roche, James Dr SAF/OS
     To: Wynne, Michael Mr. OSD-ATL
     Date: Wednesday, September 03, 2003
     Subj: Re: Ken Kreig ltr

       Keep the faith, Baby, we'll need it tomorrow. Please be 
     prepared to tell the SASC that we did discuss whether or not 
     to do an AOA, and that one isn't required. Further, Sen 
     McCain thinks Schmitz is an authority on the subject! Jim.
                                                Dr. James G Roche,
                                       Secretary of the Air Force.

     From: Wynne, Michael Mr. OSD-ATL
     To: Roche, James Dr. SAF/OS
     Date: Wed Sep 03, 2003
     Subj: Re: Ken Kreig Ltr

       James, You are nearing sainthood, inspite of your youth. I 
     think your sidebar with Tony C. Made a difference.
           Best Regards,
                                                             Mike.

     From: Wynne, Michael, Mr. OSD-ATL
     To: Roche, James Dr. SAF/OS
     Date: Wednesday, July 09, 2003
     Subj: RE: FW: Footnote

       I can only repeat that you are actually winning. To change 
     subjects, the F-22 DAB went reasonably well, and will lead to 
     a second IPR and decision DAB in September. I complimented 
     Rick Lewis, and Tom Owen, but told them not to let up. 
     September will come quickly.
           Best,
                                                             Mike.

     From: Roche, James Dr. SAF/OS
     To: Wynne, Michael Mr. OSD-ATL
     Date: Wednesday, July 09, 2003
     Subject: RE: FW: Footnote

       Mike, thanks for your candor. I will only add to the 
     footnote of the letter I sign that ``the funds to execute 
     such an alternative could not be made available without 
     harming combat capability.'' Then, no one can accuse Don of 
     ``wasting'' $1.9B of taxpayer money. Stan Crock's article is 
     another in a long series on varying issues where my friend 
     missed the point. Jim.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: Wynne, Michael, Mr. OSD-ATL
     To: Roche, James Dr. SAF/OS
     Date: Wednesday, July 09, 2003
     Subj: RE: FW: Footnote

       Jim--Good on Pete--he left before the fight--I believe that 
     this is a fair display. This is a footnote to a lengthy text, 
     and offers a bone to the critics recently in Business Week 
     who say that you and we tortured the economic argument to get 
     what we want. I believe that addressing this point in this 
     fashion takes the teeth out of their criticism. This will not 
     embarrass at all the Secretary, as I would not even have 
     considered it otherwise. This followed one full week of 
     negotiation to remove it from the text and get it to only 
     footnote status.
       My advice to you is to take the deal as written, sign it 
     out of this Building--get the term waiver, and let the House 
     and Senate proponents, do their magic. I think you have a 
     major victory, and are letting a minor math point get in 
     front of a major policy win.
           Best,
                                                             Mike.

     From: Roche, James Dr. SAF/OS
     To: Wynne, Michael, Mr. OSD-ATL
     Date: Tuesday, July 08, 2003
     Subject: RE: FW: Footnote

       Mike, it's not that easy for you. Pete resolved these. You 
     don't want to be put in a position of embarrassing Don; nor 
     do I. If I refuse to sign, you will have to explain it 
     anyhow! We should present DoD's position and let OMB add the 
     bogus point not us. Bogus because we DON'T HAVE THE $$$ NOW 
     WITHOUT GIVING UP COMBAT CAPABILITY! This was Pete's 
     argument. We turned to a lease because of this reality. The 
     footnote to which you agreed? NEVER mentions this point! 
     That's just not wise. Don't you agree? Jim.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: Wynne, Michael, Mr. OSD-ATL
     To: Roche, James, Dr. SAF/OS
     Date: Wednesday, July 08, 2003
     Subj: RE: FW: Footnote

       Jim: I am out of this now--though I will front what you 
     want. As a footnote, this could be any number, not one that 
     either you and I must defend. At this juncture, it's up to 
     you to sign or not. I hope you think it over and get it out 
     of the building.
           Best,
                                                             Mike.

     From: Roche, James Dr. SAF/OS
     To: Wynne, Michael Mr OSD-ATL
     Date: Tuesday, July 08, 2003
     CC: Sambur Marvin Dr. SAF/AQ
     Subj: Re: FW: Footnote

       Mike, I don't like it. Why? Because we don't agree with the 
     calculation! As important, it fails to give an alternative, 
     lease supportive case where the NPV is positive! If the 
     addition to the footnote added: ``. . . Similarly, if blah 
     blah, then the NPV would favor a lease by $$$.'' As this 
     stands, it is embarrassing to you, me, and the Sec Def. 
     Senator McCain and others who oppose the lease will leap to 
     this number! Why is this so hard for you to see, Mike? 
     Further, the footnote missed Pete Aldridge's point that this 
     is a hypothetical since the Air Force doesn't have the BA to 
     enter into such a multi year contract, even if the Congress 
     bent its rules to do so without limited production!
       Marv, what do you think? Please get together with Mike to 
     come up with a more palatable and balanced version of the 
     footnote.
       Jim.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: Wynne, Michael Mr OSD-ATL
     To: Roche, James Dr. SAF/OS
     Date: Tue Jul 08, 2003
     Subject: FW: Footnote

       Jim: I've gotten the 1.9B relegated to a footnote and I've 
     made an agreement with OMB so that we can proceed. You can 
     sign it in the morning if you agree if not I'm not sure what 
     to do. Meeting with DSD went fine. Most are hoping that you 
     refuse to sign. I told them not so fast.
           Best,
                                                             Mike.

     From: Spruill, Nancy Dr. OSD-ATL
     To: Wynne, Michael Mr. OSD-ATL
     Date: Tuesday, July 08, 2003
     CC: Spruill, Nancy, Dr. OSD-ATL
     Subject: Footnote.

       Mike: This is what I've copied for your convenience.
           Thanks,
                                                            Nancy.

       The Footnote is to the sentence that says: Applying the A-
     94 test, it was determined that the net present value of the 
     multi-year lease option and a traditional purchase option 
     results in a NPV favoring a purchase of $150 million, as 
     shown in Table 1[1].
       Footnote: [1] In evaluating the net present value of the 
     lease and purchase options as required by OMB Circular A-94, 
     the Air Force relied on the availability of multi-year lease 
     authority granted by Congress in 2002 Defense Appropriations 
     Act. Had the Congress chosen instead to provide multi-year 
     procurement authority the NPV could favor purchase by up to 
     $1.9 billion. While this information affords a measure of 
     clarity in an equitable comparison of terms and NPV, it is 
     provided with the understanding that multiyear procurement 
     authority was not available and therefore not a viable option 
     for the Administration's analytical consideration.

     From: John Jumper AF/CC
     To: William Bodie SAF/OS; James Roche SAF/OS
     Date: June 22, 2002
     Subj: RE: CNBC Interview--Tanker Recapitalization

       Great themes, thanks. JJ.


[[Page S11783]]


     From: William Bodie SAF/OS
     To: James Roche SAF/OS; John Jumper AF/CC
     Date: June 21, 2002
     Subj: FW: CNBC Interview--Tanker Recapitalization

       We've got Loren doing the Lord's work again. ``3rd Party'' 
     support at its best.

     From: T124C41
     Sent: Friday, June 21, 2002 10:55 AM
     To: carey
     Cc: william.bodie
     Subject: CNBC Interview--Tanker Recapitalization

     To: Mac Carey
     From: Loren Thompson
     Date: June 21, 2002
     Subj: CNBC Interview--Tanker Recapitalization

       Last Monday I was interviewed by CNBC for an upcoming 
     segment on the Air Force tanker leasing controversy. I talked 
     to CNBC anchor Marsha McCallum yesterday, and she said the 
     segment is due to air at 3:15 pm on Monday. Senator McCain 
     will also be on the segment.
       CNBC will only use a small portion of what I said. For the 
     record, though, here are the ten themes I told her, in some 
     cases several times:
       (1) Tankers are essential enablers of American military 
     power, and will become more so as our network of overseas 
     bases continues to shrink.
       (2) Every bullet and bean America delivered to Afghanistan, 
     not to mention every soldier and fighting system, got there 
     on an airplane that had to be refueled in flight by a tanker.
       (3) This month marks the 45th anniversary of the first 
     delivery of a KC-135 tanker to the Air Force, reflecting the 
     fact that 90% of the tanker fleet has grown quite aged.
       (4) The fleet is so old that a third of airframes are in 
     repair shops or waiting to go there on any given day.
       (5) The planes must be replaced, and the Air Force has 
     determined that the Boeing 767 is the best aircraft to use.
       (6) Replacement of over 500 tankers may prove to be the 
     biggest defense procurement program of this generation.
       (7) But even if we begin buying planes at the rate of two 
     dozen per year, it will take the Air Force 20 years to 
     replace the fleet--by which time some of the KC-135s will be 
     at twice their design lives.
       (8) Flight hours is a useful indicator of airframe fatigue, 
     but it tells you very little about the toll corrosion may be 
     taking on the planes.
       (9) Leasing is a common practice among commercial airlines 
     to mitigate the cost impact of acquiring large aircraft.
       (10) Senator McCain--the only critic of leasing in 
     Congress--will not succeed in blocking a 767 lease because 
     tanker replacement is critical and he has offered no 
     alternative to leasing.
       Martha and I have actually had a number of conversations 
     outside the taping, allowing me to repeat some core themes. 
     She seems thoughtful and open-minded, with no axe to grind. 
     Incidentally, I told her the lease was the exact opposite of 
     a Boeing ``bailout''--it's a government attempt to get good 
     terms from the company by taking advantage of a downturn in 
     demand for commercial transports.
       2004 Defense Planning Guidance directs a review of tanker 
     replacement options, indicating the issue is now on OSD's 
     radar screen.

     From: Bodie, William C., Mr, SAF/OS
     Sent: Friday, June 21, 2002 11:26 AM
     To: Roche, James, Dr., SAF/OS
     Subject : RE: CNBC Interview--Tanker Recapitalization

       We'll track it to see if CNBC gives us a fair shot. Glad 
     we're doing 737 stuff Monday.

     From: James Roche
     To: William Bodie
     Date: June 21, 2002
     Subj: RE: CNBC Interview--Tanker Recapitalization

       Good work!
       Jim.
                                                   James G. Roche,
                                       Secretary of the Air Force.

     From: Bodie, William C., Mr, SAF/OS
     Sent: Friday, June 21, 2002 11:08 AM
     To: Roche, James, Dr., SAF/OS; Jumper, John, Gen, AF/CO
     Subject: FW: CNBC Interview--Tanker Recapitalization

       We've got Loren doing the Lord's work again. ``3rd Party'' 
     support at its best.

     From: T124C41
     Sent: Friday, June 21, 2002 10:55 AM
     To: carey
     Cc: william.bodie
     Subject: CNBC Interview--Tanker Recapitalization

     TO: Mac Carey
     FROM: Loren, Thompson
     DATE: June 21, 2002
     RE: CNBC Interview--Tanker Replacement

       Last Monday I was interviewed by CNBC for an upcoming 
     segment on the Air Force tanker leasing controversy. I talked 
     to CNBC anchor Marsha McCallum yesterday, and she said the 
     segment is due to air at 3:15 PM on Monday. Senator McCain 
     will also be in the same segment.
       CNBC will only use a small portion of what I said. For the 
     record, though, here are the ten themes I told her, in some 
     cases several times:
       (1) Tankers are essential enablers of American military 
     power, and will become more so as our network of overseas 
     bases continues to shrink.
       (2) Every bullet and bean America delivered to Afghanistan, 
     not to mention every solider and fighting system, got there 
     on an airplane that had to be refueled in flight by a tanker.
       (3) This month marks the 45th anniversary of the delivery 
     of a KC-135 tanker to the Air Force, reflecting the fact that 
     90% of the tanker fleet has grown quite aged.
       (4) The fleet is so old that a third of airframes are in 
     repair shops or waiting to go there on any given day.
       (5) The planes must be replaced, and the Air Force has 
     determined that the Boeing 767 is the best aircraft to use.
       (6) Replacement of over 500 tankers may prove to be the 
     biggest defense procurement program of this generation.
       (7) But even if we begin buying planes at the rate of two 
     dozen per year, it will take the Air Force 20 years to 
     replace the fleet--by which time some of the KC-135s will be 
     at twice their design lives.
       (8) Flight hours is a useful indicator of airframe fatigue, 
     but it tells you very little about the toll corrosion may be 
     taking on the plane.
       (9) Leasing is a common practice among commercial airlines 
     to mitigate the cost of acquiring large aircraft.
       (10) Senator McCain--the only critic of leasing in 
     Congress--will not succeed in blocking a 767 lease because 
     tanker replacement is critical and he has offered no 
     alternative to leasing.
       Martha and I have actually had a number of conversations 
     outside the taping, allowing me to repeat some core themes. 
     She seems thoughtful and open-minded, with no axe to grind. 
     Incidentally, I told her the lease was the exact opposite of 
     a Boeing ``bailout''--it's a government attempt to get good 
     terms from the company by taking advantage of a downturn in 
     demand for commercial transports.
       2004 Defense Planning Guidance directs a review of tanker 
     replacement options, indicating the issue is now on the OSD's 
     screen.
     From: Marvin Sambur SAF/AQ
     To: Jim Albaugh
     Date: June 17, 2003
     Subj: FW: USAF Green Aircraft Pricing

       Jim: I have been working with Bob to answer a question from 
     McCain concerning his claim that Continental received a 
     better deal than the USAF. I asked Bob for a simple statement 
     that, accounting for inflation and airworthiness directives, 
     we received a better deal than anyone else. Given the assault 
     that McCain is mounting on this deal (see attached) and our 
     claims that we received the best deal, we need such a 
     statement. Thanks!
                                                             Marv.

     From: Bob Gower
     To: Marvin Sambur SAF/AQ
     Date: June 16, 2003
     Subj: RE: USAF Green Aircraft Pricing

       We have the McCain request. I am traveling to DC in the 
     morning for Hill visits the next few days. I will take your 
     response up the chain.

     From: Marvin Sambur SAF/AQ
     To: Bob Gower
     CC: Arlene Marvin
     Date: June 16, 2003
     Subj: Re: USAF Green Aircraft Pricing

       Bob: This is unacceptable. McCain will eat us for lunch. 
     See attached.

     From: Bob Gower
     To: Sambur SAF/AQ
     Date: 6/16/2003
     Subj: USAF Green Aircraft Pricing

       Marv: We looked at providing some type of certification for 
     the ``green'' aircraft pricing and would prefer not to do 
     this for two primary reasons.
       First, we have hurt our commercial airline market enough 
     through the concessions, profit cap, and most favored 
     customer clause. To provide an additional measure of 
     certainty would set a new standard for the Boeing company 
     that we prefer not to set. All elements of this deal are very 
     visible and this would not be good for our other markets. Our 
     best customers have understood the Most Favored Customer 
     clause because some of them have seen these in the past but 
     these have been forward looking with no commitment to 
     historical pricing.
       Second, we believe Boeing providing additional commitments 
     has little or no additional political benefit. I believe that 
     if the USAF attempted to stand behind a Boeing statement that 
     our enemies would unjustly attack Boeing's credibility.
       Therefore, my proposed solution is for the USAF to stand 
     behind the facts which I see as:
       The USAF is confident we have received a most competitive 
     price on the basic 767 aircraft. The USAF has ensured this 
     through multiple means:
       (1) We obtained confidential information directly from a 
     major airline that validates we obtained a very competitive 
     price from a historical position,
       (2) We obtained a Most Favored Customer clause that 
     protects the USAF on a going forward basis since it requires 
     Boeing to refund the USAF should they ever sell a 767 for 
     less than what the USAF paid, and
       (3) The USAF has capped Boeing's earnings to ensure the 
     maximum profits they could

[[Page S11784]]

     make are in line with DoD profit guidelines, insuring the 
     USAF would benefit in the future should cost come in lower 
     than predicted. Should cost be higher, Boeing bares the risk.
       With this firm, fixed price contract and Boeing responsible 
     for all development costs, we believe this agreement is 
     unprecedented in its protection for the taxpayer, and insure 
     not only have we received the best pricing possible, but we 
     will continue to obtain the best pricing from Boeing in the 
     future.
           Regards,
                                                              Bob.

     From: Marvin Sambur SAF/AQ
     To: Darleen Druyun SAF/AQ; James Roche SAF/OS
     Date: October 10, 2002
     Subj: RE: Tanker Leasing

       Jamie Durnan stopped me this morning to tell me that OMB 
     ``will fight us to the death on the lease.'' I asked why and 
     he told me that they do not believe our numbers and their 
     analysis shows that it is better to purchase. (At the leasing 
     meeting the OMB number was about $50M favorable to purchase 
     out of about $18B fly away cost.) I told him that we admit 
     that the deal is probably a push but if we buy according to 
     the same funding stream as leasing, we only get 6 tankers by 
     2009 versus 67 by leasing. The quicker delivery acts as an 
     insurance policy against the unknown effects of aging and 
     accelerating usage. He thought that was a compelling 
     argument.
                                                             Marv.

     From: Bill Essex SAF/AQQ
     To: Marvin Sambur SAF/AQ
     Date: August 03, 2002
     Subj: FW: Potential OMB Problems with 767 Lease

       Sir: Our take on the OMB letter to Sen. McCain is below. 
     Mr. Daniels went out of his way to slam 767 lease even though 
     he does not really know much about it yet. Looks like an 
     interesting fight shaping up.
           VR,
                                                             Bill.

     From: Marvin Sambur
     To: James Roche
     Date: October 21, 2002
     Subj: 767 meeting with OMB

       Boss: We spent three hours with Robin this AM going over 
     the issues they highlighted for discussion and additional 
     data. These topics were: Requirements justification, price of 
     the green a/c, why our proposal meets the requirements of an 
     operating lease and a better understanding of the legal 
     ramifications of a Special Purpose Entity that would hold 
     title to the tanker a/c. She was quite upset when she learned 
     from the introductions that Boeing was present to answer any 
     questions. When we saw her ``angst'' we told her they would 
     leave or we could have an executive session with government 
     only participants. She told us the damage was done and did 
     not take up the options we outlined to her. We invited Boeing 
     in to respond to questions she and her staff had and frankly 
     they were very helpful in filling in some details and adding 
     credibility. This was not a negotiation meeting and Boeing 
     was only to provide answers on the pricing. I expect she will 
     express to you her anger over Boeings presence.
       Robin and her staff asked for additional data which we are 
     preparing to send over in the following read: What would the 
     AF budget look like per FY to purchase the same number of 
     aircraft being built and delivered under the lease? (The 
     insurance argument of getting the lease tankers 5 years 
     earlier with about the same net present value resonated with 
     her. In addition, the point that Boeing will stop producing 
     the 767 and if we delay, the price will rise considerable was 
     also a strong argument to her.) However, they believe our 
     price for the green a/c is too high and have asked for other 
     large airline purchases, config and what the discount was 
     from the list price. Apparently her staff made a bunch of 
     phone calls and claim their number is lower than ours but she 
     is the first to admit that she does not know the real 
     validity behind them. We need to give them the maintenance 
     costs of the 135s vs. The proposed 767 tankers. She will want 
     a separate session on tanker termination liability issues. I 
     believe we probably talked passed each other on this and I 
     have directed my staff to prepare very clear charts on this 
     to set the record straight. He also wants a copy of the draft 
     contract T's and C's. In addition, she directed we rerun the 
     numbers using a 6 years OMB discount rate in addition to the 
     15 year period. We have this and will give to them to OMB.
       I expect she will call you. We firmly believe the 
     contractors attendance at the meeting was very helpful but 
     she will probably blast us for it. We will keep you posted on 
     our progress.

     From: Marvin Sambur
     To: James Roche
     Date: September 11, 2002
     Subj: 767 Tanker justification

       Boss: I kicked off the effort to establish a ``need'' 
     justification for the tankers. Hope to have a conceptual 
     framework ready by the end of the week.
       Spoke to Robin after the meeting to tell her that the 
     economic justification is not a slam dunk for either position 
     (purchase or lease.) It is more a push and a slight change in 
     the interest rates can flip the analysis. At the end of the 
     day, we have to prove that there is a TRUE need and that 
     there are other advantages to leasing (earlier delivery, 
     affordability, etc) that make it a good business deal. It is 
     going to be a tough sell given the other factors such as 
     liability and indemnification.
                                                             Marv.

     From: Marvin Sambur
     To: James Roche; Scott Custer
     CC: Peter Teets; John Jumper; Robert Foglesong; Joseph 
         Wehrle, William Bodie; John Corley; Janet Therlanos; 
         Debra Henderson; Warren Henderson; Judy Fedder; David 
         Rue; Robert Pavelko; Bob Edmonds; Skip Daly; Christopher 
         Bowman; Gregory Christ; John Handy; Paul Essex; William 
         Hodges; Michael Zettler; Michael Montelongo; Stephen 
         Lorenz; Duncan McNabb; Gary Heckman; Kevin Chilton; 
         Raymond Johns; Ronald Rand
     Date: July 25, 2003
     Subj: Re: SASC Tanker Lease Hearing

       But remember, they can not play the game without the 
     football and where the football goes determines the end 
     result!
                                                             Marv.

     From: James Roche
     To: Marvin Sambur
     CC: Peter Teets; John Jumper; Robert Foglesong; Joseph 
         Wehrle, William Bodie; John Corley; Janet Therlanos; 
         Debra Henderson; Warren Henderson; Judy Fedder; David 
         Rue; Robert Pavelko; Bob Edmonds; Skip Daly; Christopher 
         Bowman; Gregory Christ; John Handy; Paul Essex; William 
         Hodges; Michael Zettler; Michael Montelongo; Stephen 
         Lorenz; Duncan McNabb; Gary Heckman; Kevin Chilton; 
         Raymond Johns; Ronald Rand
     Date: July 25, 2003
     Subj: RE: SASC Tanker Lease Hearing

       Yes, but for whom? I always wondered what it would feel 
     like to be the football! Jim.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: Marvin Sambur
     To: James Roche
     CC: Peter Teets; John Jumper; Robert Foglesong; Joseph 
         Wehrle, William Bodie; John Corley; Janet Therlanos; 
         Debra Henderson; Warren Henderson; Judy Fedder; David 
         Rue; Robert Pavelko; Bob Edmonds; Skip Daly; Christopher 
         Bowman; Gregory Christ; John Handy; Paul Essex; William 
         Hodges; Michael Zettler; Michael Montelongo; Stephen 
         Lorenz; Duncan McNabb; Gary Heckman; Kevin Chilton; 
         Raymond Johns; Ronald Rand
     Date: July 25, 2003
     Subj: RE: SASC Tanker Lease Hearing

       And they are playing the Jets. This is a good omen.

     From: James Roche
     To: Scott Custer
     CC: Peter Teets; John Jumper; Robert Foglesong; Joseph 
         Wehrle, William Bodie; John Corley; Janet Therlanos; 
         Debra Henderson; Warren Henderson; Judy Fedder; David 
         Rue; Robert Pavelko; Bob Edmonds; Skip Daly; Christopher 
         Bowman; Gregory Christ; John Handy; Paul Essex; William 
         Hodges; Michael Zettler; Michael Montelongo; Stephen 
         Lorenz; Duncan McNabb; Gary Heckman; Kevin Chilton; 
         Raymond Johns; Ronald Rand
     Date: July 25, 2003
     Subj: Re: SASC Tanker Leasing Hearing

       Goodie! The same day as the opening day of Redskins 
     football! JGR.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: Scott Custer
     To: James Roche
     CC: Peter Teets; John Jumper; Robert Foglesong; Joseph 
         Wehrle, William Bodie; John Corley; Janet Therlanos; 
         Debra Henderson; Warren Henderson; Judy Fedder; David 
         Rue; Robert Pavelko; Bob Edmonds; Skip Daly; Christopher 
         Bowman; Gregory Christ; John Handy; Paul Essex; William 
         Hodges; Michael Zettler; Michael Montelongo; Stephen 
         Lorenz; Duncan McNabb; Gary Heckman; Kevin Chilton; 
         Raymond Johns; Ronald Rand
     Date: July 25, 2003
     Subj: SASC Tanker Lease Hearing

       Sir, looks like 4 Sep for the SASC tanker hearing . . . 
     with you as the AF witness.
           V/R Scott.

     From: Robert Pavelko
     Date: July 24, 2003
     Subj: SASC Tanker Lease Hearing

       Just received a telephone call from Mr. Tom McKenzie, SASC 
     [202-224-9347]. He wanted to give us a heads up the SASC will 
     be calling a hearing on the AF Tanker Lease.

[[Page S11785]]

     Projected date is 4 September in the morning. Witness 
     invites: SECAF, Director of OMB, and Sec Wynne. His POC is 
     Bill Greenwalt. 202-224-6778.
           V/R,
                                                Robert J. Pavelko.

     From: Marvin Sambur
     To: James Roche
     Date: November 19, 2003
     Subj: FW: Tankers

       FYI.

     From: Scott Custer
     To: Marvin Sambur
     Date: November 19, 2003
     Subj: Tankers

       Sir: Mr. Wynne is quoted as saying we would pay up front 
     not purchase on delivery, that it will probably be 2 
     contracts, and that the price would likely need to be 
     renegotiated . . . not helpful. I don't know how this got so 
     messed up but I think we still need to proceed with the deal 
     we want . . . and take it to the SASC for their views. And, 
     we must do it quickly as the pending omnibus may be the only 
     vehicle left to get any language changes we'll need to make 
     it work.
           V/R,
                                                            Scott.

     From: Dov Zakheim
     To: Marvin Sambur
     Date: November 25, 2002
     Subj: RE: KC-767 Lease Delay.

       I have a simple question? Where is the USAF money to fund 
     this lease?

     From: Marvin Sambur
     To: Pete Aldridge; Dov Zakheim
     Date: November 22, 2003
     Subj: KC-767 Lease Delay

       Pete and Dov: I understand the suggestion we delay the KC-
     767 lease two years has come up again at high levels within 
     OSD (though this time without necessarily paying to re-engine 
     KC-135Es) in order to do a format AoA. As a follow-up to my 
     recent e-mail on this subject:
       A formal AoA will cost money, delay the program two years, 
     and still come up with the same answer we have today. There 
     are only a few aircraft that can serve as tankers, they are 
     already in production, and so analyzing their respective 
     capabilities and costs won't take long--in fact, it's already 
     been done and the results passed to OSD. What's left to 
     study?
       For the last 45 days, OSD has had enough data to support a 
     decision analysis--all they really need is the A-11/A-94 
     model we provided to determine that the deal is a good one.
       A complete contract is not required for OSD to analyze the 
     lease; contracts are written to match the programs approved 
     and justified through analysis; our A-11/A-94 model is the 
     primary analytical tool upon which we are building our 
     contract; if OSD analyzes the model (which we believe they 
     have not done), they will be analyzing the proposed program.
       If restarted negotiations in 2005 resulted in a real price 
     increase of just 5%, we will have to drop one aircraft per 
     year to live within our budget. This will add further cost 
     and stretch-out the KC-135 recapitalization effort two more 
     years in addition to the two-year late start.
       A 5% price increase due to loss of negotiation leverage 
     will add more than $700M to the cost of the first 100 KC-
     767s.
       Bottom line: the penalty for delaying the lease we've 
     negotiated today could be substantial even without the added 
     burden of paying for maintaining KC-135Es. Please keep in 
     mind that the low-cost deal we have today is the result of 
     negotiating with a manufacturer suffering the impacts of an 
     industry-wide downturn. That downturn is not expected to 
     continue for another two years. As the facts show, our 
     negotiating team got a better deal on these 767s than a major 
     airline did with theirs with a 20-yr exclusive contract--we 
     likely won't do as well when the industry recovers. How, 
     then, would we explain this two-year delay to Congress?
                                                             Marv.

     From: Michael Wynne
     To: Marvin Sambur
     Date: July 08, 2003
     Subj: RE: Footnote

       Marv: At long last, this is the best that I could get--
     relegating the non-available comparison to a footnote. I have 
     been to the speakers office, and they don't care how it 
     reads, just get it over to congress and let them get it done.
       At this point, it is up to Jim to sign or not.
           Best,
                                                             Mike.

     From: Marvin Sambur
     To: James Roche; Michael Wynne
     Date: July 08, 2003
     Subj: Re: Footnote

       The primary reason for the lease is because it affords us 
     the ability to recapitalize faster. By putting in the 
     footnote, we allow our enemies to stall with the excuse that 
     the AF should go to Congress and ask for a MYP. The OSD 
     position is that the financials are a wash, so way cloud the 
     issue and cause problems. Submit without the footnote and we 
     will prevail. Submit with the footnote and we have a battle 
     on the wrong issue that will cause big time delays.
                                                             Marv.

     From: Mary Walker
     To: James Roche
     Date: August 21, 2003
     Subj: Re: Revised OMB Circular A-11

       Boss: I had the same question. It would be nice to say we 
     comply either way. Will see. Moreover in my opinion, now in 
     preparation, I could speak to this. You may be asked.
                                                             Mary.

     From: James Roche
     TO: Daniel Ramos
     CC: Marvin Sambur, William Hodges, Ty Hughes, Mary Walker, 
         Janet Therianos, John Jumper
     Date: Aug 21, 2003
     Subj: Re: Revised OMB Circular A-11

       Dan, thanks much. Good work. How does our lease fare under 
     the new circular? If it fails, then OMB may be in for an 
     attack from Sen McCain. What dumb time to change the rules!!!
       JGR.
                                               Dr. James G. Roche,
                                       Secretary of the Air Force.

     From: Daniel Ramos
     To: James Roche
     CC: Marvin Sambur, William Hodges, Ty Hughes, Mary Walker, 
         Janet Therianos
     Date: Aug 21, 2003
     Subj: Revised OMB Circular A-11

       Sir: Earlier this week Ms. Walker provided you with a copy 
     of a revised version of OMB Circular A-11 issued on July 25, 
     2003. Among other things, the revised A-11 adds new 
     guidelines for distinguishing between operating leases, 
     capital lease the KC-767s requires that it be an operating 
     lease based on the definition provided by OMB ``at the time 
     of the lease.'' The statute does not state whether ``at the 
     time of the lease'' means when the lease is signed or when it 
     was first submitted to OMB for review, so it is possible that 
     the revised A-11 could apply to the KC-767 transaction. We 
     immediately engaged with OMB on this issue, and as of this 
     afternoon OMB has verbally agreed to the following: OMB will 
     issue a clarifying letter stating that the revised A-11 
     applies only to transactions approved by OMB after July 25, 
     2003. At our request, OMB will then issue a letter addressed 
     to you stating that OMB approved the Air Force KC-767 
     transaction prior to July 25, 2003, and therefore the revised 
     A-11 does not apply. OMB plans to issue the clarification 
     early next week and the letter to the Air Force by the end of 
     next week. If there is any change to this plan, we will let 
     you know.

     From: Marvin Sambur
     To: James Roche
     Date: November 21, 2003
     Subj: FW:767 Update

       FYI.

     From: Ty Hughes
     TO: Marvin Sambur
     CC: Scott Custer, Mary Walker, Daniel Ramos, Ted Bowlds
     Date: Nov 21, 2003
     Subj: 767 Update

       Dr. Sambur: OMB General Counsel called DoD GC this 
     afternoon and asked for a legislative proposal to address the 
     obligation of funds for the tanker. OMB also asked what the 
     Air Force can with respect to obligation of funds if there is 
     no new legislation.
       DoD has prepared language that would allow obligation of 
     funds upon delivery of the aircraft. The draft language would 
     solve the problem. It should go over this evening. OMB is 
     considering offering the language for inclusion in the 
     Omnibus Appropriations Act.
       Without legislation, the DoD fiscal lawyer is still of the 
     view that the Air Force must obligate all of the funds for 
     purchase when the aircraft are ordered. We have scheduled 
     meeting for 0900 on Monday with the DoD lawyers to discuss 
     this.
                                                        Ty Hughes.

     From: Mary Walker
     To: James Roche
     CC: John Jumper, Peter Teets, William Bodie, Janet Therlanos
     Date: Nov. 26, 2002
     Subj: More Updates from GC

       Boss: Welcome back! (With the thought you are reading this 
     after Thanksgiving . . .) Since I won't be here when you get 
     in on Monday the 2nd (I'll be on my way to give a speech at 
     the USAFE JAG conference . . .), I wanted you to have my long 
     list of accumulated updates so you can be current with the 
     issues we are working that are of known or suspected 
     importance to you. Don Fox will be covering for me until I 
     get back on Dec. 6th. This will fill you in.
       767 Tanker Lease (legal issues):
       While most of the lease terms have been agreed upon, a 
     number of terms have been elevated to SAF. The most important 
     ones include the following:
       (1) A very significant issue just surfaced and may require 
     us to obtain additional legislation. Boeing representatives 
     told us the investors need assurance that the Air Force will 
     not terminate the lease agreement while the aircraft are 
     under the 3-year construction. We are concerned about the 
     fiscal consequences of such an assurance since 40+ aircraft 
     may be in various stages of construction at any one time. We 
     are analyzing this issue under the limited statutory guidance 
     for this program and past precedent, which is also limited 
     because leasing of major systems has been so rare. FI we are 
     unable to resolve this issue with the staff in DoD GC, we may 
     need to seek another provision in law to provide adequate 
     authority to meet our needs.
       (2) Boeing wants a clause advising the government of the 
     tax treatment it wants reflected in the transaction. We have 
     told them that the tax treatment is a matter between Boeing 
     and the IRS, not the Air Force.

[[Page S11786]]

     Boeing is considering whether to seek a Revenue Ruling or 
     informal advice form the IRS. If they decide to go that 
     route, we may want to ask the IRS to expedite consideration 
     of their request.
       (3) The bond rating agency wants the government to agree 
     not to initiate a bankruptcy petition against the lessor 
     until one year and a day after the final lease payment. While 
     we understand this is a standard provision in commercial 
     aircraft lease, DOJ, not the Air Force, decides when to file 
     documents (such as bankruptcy petitions). We will ask Boeing 
     to discuss this matter with the bond rating agency to see if 
     they can make an exception for a government lessee or lese 
     tailor the clause in a way that would not bind DOJ. If not, 
     we will work the issue with Justice.
       (4) Boeing also wants indemnification under Public Law 85-
     804 for ``unusually hazardous risks.'' You approved such 
     indemnification in the case of the 737 lease. However, 
     Boeing's request is now broader and the company seeks 
     indemnification for the lender and officers of the various 
     entities involved. The Air Force has not provided such broad 
     indemnification in the past. We are currently reviewing 
     whether we have the legal authority to do this and then there 
     is the policy issue of whether this is something we want to 
     consider. We also are working on the definition of unusually 
     hazardous risk in this case.

     From: Michael Wynne
     To: James Roche
     Date: June 24, 2003
     Subj: Meeting

       Jim: Thanks for hosting on Tankers--flavor just right, but 
     I may need to borrow that reverse flak jacket yet.
           Best,
                                                             Mike.

     From: Michael Wynne
     To: James Roche
     Date: July 17, 2003
     Subj: Good Luck

       Jim: I wanted to say again congrats to get to the next 
     phase fight on Tankers, likely less than the fight so far. 
     Good Luck as well on the nom and confirm process. I'll be 
     somewhere behind you. President willing.
           Best,
                                                             Mike.

     From: Michael Wynne
     TO: Nancy Spruill, Ronald Sega, William Porter
     CC: Richard Wiersema; Raymond Jones; Robert Nemetz
     Date: November 01, 2003
     Subj: RE: Two Issues--Tankers and Ship Funding

       I think I responded but if not--I thought we could support 
     two R&D ships if in different yards, and so stretch R&D a 
     little. Incremental for production would be a stretch. 
     Tankers--aaaaarrrrgggghhh!!! enough said.
           Best,
                                                             Mike.

     From: Nancy Spruill
     To: Michael Wynne; Ronald Sega; William Porter
     CC: Richard Wiersema; Raymond Jones; Robert Nemetz
     Date: November 1, 2003
     Subj: RE: Two Issues--Tankers and Ship Funding

       Mike: This evening Deputy Secretary Wolfowitz, Dr. Sega, 
     Marv Sambur, Dave Patterson, Dan Stanley and I met with Joel 
     Kaplan and others from OMB/WH/VP's office.
       The issue was a legislative strategy for the way ahead on 
     the tanker lease, in light of the proposed Warner amendment/
     press articles/interactions with Congress/etc.
       There was a lot of support to go with the amendment but AF 
     argued that there were other players--HASC and 
     appropriators--so we should let the process work its way out. 
     Dr. Wolfowitz raised the issue of a compromise and asked for 
     an additional 28 hours to get a Department position to Joel 
     Kaplan.
       Dave Patterson will have the lead and Ron Sega and I will 
     work w/him.
       They are aware of your recommendation about where to get 
     offsets, if we went with 20/80.

     From: James Roche
     To: Paul Weaver
     Sent: May 21, 2002
     Subject: (No subject)

       Thanks, Paul. You are correct re KC-767's. Let's wait until 
     we have a deal. We just completed negotiations on the four 
     737's for Congressional travel. Re F-22's, the ANG is welcome 
     to make the following points:
       (1) The F-22 is needed, and will be a formidable weapon 
     system.
       (2) It will be important for the ANG to be part of this 
     program.
       (3) If the program is cut, the chance to put F-22's in the 
     Guard effectively will evaporate.
           Be well.
                                                              Jim.

     From: Paul Weaver
     To: James Roche
     Sent: May 21, 2002
     Subject: (No subject)

       Mr. Secretary: I just returned on Monday from the Adjutants 
     General's conference in Boise. Great turnout and great 
     support for our Air Force. Gen Kane and Killey briefed them 
     on their meeting with you and all voiced overwhelming 
     approval to help out in AF modernization where ever they can. 
     Led by the TAG from Arizona, who's Phoenix unit flies the 
     oldest KC-135E's, want to start working the Hill for support 
     for the KC-767. They do not want Sen. McCain to hurt the 
     proposal. They want to get out the straight facts on the old 
     E's. I advised them to hold off until a deal is finally cut 
     between the AF and Boeing. I want to make sure that that is 
     still your position. They will all respect your wishes and 
     will move out when you give the signal to do so.
       They also want to do whatever it takes to keep the F-22's 
     in production and have the ANG as part of it.
       Danny did a great job and I'm sure he will do well in the 
     future as the Director.
           God Bless,
                                                             Paul.

     From: Burkhardt & Associates
     To: James Roche
     Sent: May 3, 2002
     Subject: WSJ

       Not very helpful article this morning. Here's the short 
     outside the beltway reaction. (If you want the long version, 
     give me a call)--
       (1) Why the secrecy of your Wall street advisors? I think 
     you got lousy legal advice on that memo. (If the article is 
     accurate and you're using Wall Street advisors). You're the 
     client. I can't envision a circumstance under which whoever 
     is structuring this deal for you wants the fact that their 
     doing so is kept quiet. It's red meat to Congress to tell 
     them they can't know something.
       (2) Claiming confidentiality is like claiming executive 
     privilege. Even if it's correct in a narrow technical sense 
     (and I'm not at all convinced it is) it only hurts you--
     larger public case. You can't defeat the claims that you're 
     not disclosing something (by implication--something bad) (esp 
     from someone as visible as McCain) without real information. 
     I'd distribute a one page memo saying the per plane cost of 
     the lease will not be greater than x and have x be less than 
     the last lease Boeing did for some commercial entity--or that 
     x is y dollars less than the cost of a new tanker.

     From: James Roche
     To: Dr. Marvin Sambur
     Sent: May 14, 2002
     Subject: RE: Call from Boeing

       I love Ya, Big Guy. Give it to the Blue Eyed Arabs of the 
     North (the expression we used for Boeing).
                                                              Jim.

     From: Dr. Marvin Sambur
     To: James Roche
     Sent: April 9, 2002
     Subject: RE: Call from Boeing

       Boss: Gerry Daniels called to discuss the tankers. He 
     started the conversation by reminding me that McCain was a 
     minority view and if the AF brought the deal forward it would 
     easily pass. I stated that the AF would not bring this 
     forward unless it was a good deal. Apparently, he never took 
     this message seriously as he was surprised at this response. 
     I explained our business model and indicated that if Boeing 
     could not fir into this model we would shake hands and 
     disengage. I arranged to have him and his team share our 
     model. I ended the conversation by telling him that the AF's 
     reputation was at stake and we are committed to getting a 
     good deal or else there would be no deal. Boeing must take 
     some risks given the future value of this initial contract. 
     We are pointed towards an end of May conclusion as to whether 
     to disengage.
                                                             Marv.

     From: William Bodie
     To: James Roche
     Sent: April 25, 2002
     Subject: RE: US News

       Don't worry, I was never ``good'' enough to be an altar 
     boy. I liked girls too much.

     From: James Roche
     To: William Brodie
     Sent: April 25, 2002
     Subject: RE: US News

       God love you, my Son. Oops. I sound like one of those 
     dangerous clerics!!
                                                              Jim.

     From: William Brodie
     To: James Roche
     Sent: April 25, 2002
     Subject: RE: US News

       Yes, Camelot is always a `brief, shining moment.' Iorizzo 
     is no King Arthur, or even a Lancelot. If we can get through 
     this goddam fight about tankers, we'll have another Camelot 
     in the AF.

     From: James Roche
     To: William Brodie
     Sent: April 25, 2002
     Subject: RE: US News

       I hope I didn't spoil the opera for you. I think Wally is 
     still talking. We left. It was very much of a Westinghouse 
     affair.
                                                              Jim.

     From: William Brodie
     To: James Roche
     Sent: April 25, 2002
     Subject: RE: US News

       Okay, I've gone to battle stations. Leroy knows and will 
     call friendly staffers like Cortese to give them a heads up, 
     and perhaps to do something. I saw Rudy DeLeon at the Kennedy 
     Ctr and politely asked the Great White Arab Tribe of the 
     North to unleash their falcons on out behalf for once. And, I 
     talked to Loren, who is standing by to comment to this 
     reporter about the national security imperatives of tanker 
     modernization. Vago is also standing by. I will get with 
     Sambur first thing to rehearse talking

[[Page S11787]]

     points. Will get with you before we talk to the reporter.

           Say hi to Wally.

     From: James Roche
     To: William Brodie
     Sent: April 25, 2002
     Subject: RE: US News

       The call was from a very senior guy at the rag. I've talked 
     to Marv and told him to hook me in sometime between 10:00 and 
     10:30 tomorrow. Thanks much.
                                                              Jim.

     From: William Brodie
     To: James Roche
     Sent: April 25, 2002
     Subject: RE: US News

       I think your original guidance was right. Secaf takes first 
     Q on when did we know, and you both take the second. We can 
     do by phone tomorrow. We shouldn't get too excited, there is 
     no expose. Just certain scare mongers.

     From: James Roche
     To: William Bodie
     Sent: December 13, 2001
     Subject Fw: 767 lease

       Damn it! JGR.

     From: Marvin Sambur
     To: James Roche
     Sent: December 13, 2001
     Subject Fw: 767 lease

       Yesterday, I was asked to prepare an enhanced point paper 
     on the 767 lease for the Vice. The number that was given to 
     me from AQ on this enhanced paper were different from those 
     developed for the point paper prepared for you. I questioned 
     these numbers and received fuzzy answers in return. I decided 
     to do the calculation myself using an excel spreadsheet. I 
     found to my dismay that the numbers were correct according to 
     the OMB definitions but very misleading in a true financial 
     sense. The deal was not good from a true financial basis and 
     I briefed the Vice at 7:30PM of the misleading nature of the 
     numbers and advised my people that we needed to get a better 
     deal from Boeing to make this financially attractive.
       Nelson Gibbs reached the same conclusions.
       I need to make sure that in the future our financial 
     calculations are both accurate and business based. I am sorry 
     for not catching this sooner!
                                                             Marv.

     From: James Roche
     To: William Bodie
     Sent: December 13, 2001
     Subject: RE: Several items

       Bill, thanks much. I like the ROE charts a lot. Well done. 
     I want to brief the one with XI, and I've sent John a msg 
     asking whether or not we should refer specifically to the 
     C2ISR Center being double-hatted. Re 767, I am hearing of 
     some weakness in our numbers, damn it. I'll forward Marv's 
     msg to you. We may want to have Rand be ``more circumspect'' 
     in a reply. Re Chip, he is wonderful, but would have the same 
     problem with the PA&E spores that Barry has.
                                                              Jim.

     From: William Bodie
     To: James Roche
     Sent: December 13, 2001
     Subject: RE: Several items

       Boss: Hope the trip is going well, and we'll save some 
     eggnog for you. Bill Davidson's gang is faxing you a couple 
     of charts and ``ROE'' on headquarters reorg that we are set 
     to announce along with the Army next week. Reason for the fax 
     is to get your input prior to briefing Hill folks in time to 
     make the announcement. The charts are fine for the Hill and 
     they satisfy all Title 10 concerns. I worry that folks 
     internally will get the impression that we're tinkering at 
     the edges, not transforming. One battle at a time, I guess.
       Oh, I'm polishing up a draft article for your signature on 
     ``AF transformation'' that is set to appear in the next issue 
     of Joint Force Quarterly (I got them to commit to putting the 
     F22 on the cover). Will send you electrons and also have hard 
     copy for you when you return.
       Rand working on a response for Novak on 767--we still might 
     want to think about a 5 minute conversation between you and 
     Novak on it.
       Had dinner with Chip last night. He wanted me to pass on 
     his best to you, and is proud you're doing Bob Anthony's 
     event. He seems to have made peace with the idea of doing 
     strategic planning, NCTA, etc., ceding marketing to 
     Carpenter. I would put in him charge of the DC Office if I 
     were Sugar, or at least a major supporting role in govt. 
     relations. Maybe he should fo PA&E!
                                                             Bill.

     From: James Roche
     To: William Bodie
     Sent: March 30, 2002
     Subject: RE: Tanker story

       Fine story. EADS is quoted. And Loren's comment basically 
     is fine.
                                                              Jim.

     From: William Bodie
     To: James Roche
     Sent: March 30, 2002
     Subject: RE: Tanker story

       Vernon Loeb's piece is in the back of the sports section in 
     today's WP. The ``statement'' he refers to is the RTQ which 
     the LL guys made available to staffers on request. Not a bad 
     story, no errors, but not as good as Vago's. Loren apologizes 
     for saying you told him that all KC135s need to be replaced 
     on a 1 for 1 basis. He didn't think it would be in the piece.

     From: Custer Scott MajGen
     To: James Roche
     Sent: March 30, 2002
     CC: Jumper John Gen AF/CC; Moseley Michael Gen AF/CV
     Subject: NDAA

       Sir, it looks like the Auth bill will go to the floor 
     today. As suspected, the bill language may not be what the 
     lawyers and acquisition folks think we need to sign the 
     lease. However, the early conference report language looked 
     to me like it contains all we need to proceed. We are just 
     going to have to wait until later today to see how this turns 
     out. My gut feel is that each document was written for 
     precise reasons (to pacify certain factions) and that 
     ultimately we will be able to execute the lease/buy as we 
     want it done. It also looks like we are only going to be able 
     to retire 12 vs 44 135E's in FY)$ . . . even after all of our 
     attempts to engage the Hill on this I'm not surprised as this 
     is really a BRAC optics issue. As we get more visibility into 
     the NDAA, we will provide you with a summary of other major 
     issues affecting the AF.

     From: John Jumper
     To: James Roche
     Sent: April 9, 2002
     Subject: RE: Tanker Article

       Agree, I don't think there was malice, but the wording of 
     his statement could be used as evidence against out efforts. 
     As you said this morning, we just have to articulate the 
     problem we are trying to fix.
                                                             John.

     From: James Roche
     To: John Jumper
     Sent: April 9, 2002
     Subject: RE: Tanker Article

       John, even Dick would want us to begin to retire 43 plus 
     year tankers which will be about 47 to 50 years by the time 
     we actually replace them. At least, I think he would!
                                                              Jim.

     From: John Jumper
     To: James Roche
     Sent: April 9, 2002
     Subject: RE: Tanker Article

       Boss: you'll see this morning's EB has a statement from 
     Dick Myers that says the tanker fleet we have can fully meet 
     requirements now and out into the future, suggesting we don't 
     have the problem with tankers we claim to have. We are bound 
     to be asked this and I have our people working on a response.
                                                             John.

     From: James Roche
     To: Robin Cleveland
     Sent: April 28, 2003
     Subject: RE:

       Ok, I'll speak with Paul on Wednesday (I'm off to speak yet 
     again with my Little Darlings at the Academy). Let's see if 
     we can put together a Gov't Team for Best and Final. Re IDA, 
     I'd never go to them for investment banking advice! And Larry 
     has been altogether too detached. When all is said and done, 
     it's still a negotiation between the Monopsonist (the USG) 
     and the Monopoly (add the French, and it's the Duopoly).
                                                              Jim.

     From: William Bodie
     To: James Roche
     Sent: January 2, 2002
     Subject: RE: Dear Bob

       Boss: here's a cut at a letter to Novak (remember, this is 
     not for him to publish, but hopefully to shut him up). Still 
     waiting for Rand to give details on name of Novak's person 
     who called PA and when.
                                                             Bill.

     From: Pete Aldridge
     To: James Roche
     Sent: May 16, 2003
     Subject: RE: Boeing

       I agree.

     From: James Roche
     To: Pete Aldridge
     Sent: May 16, 2003
     Subject: RE: Boeing

       Thanks, Pete. I cannot bring myself to speak to That 
     Person, so I'll only forward a copy of whatever Boeing sends 
     us on Monday.
       It's time DoD made a decision as to what is right for our 
     Combat Air Forces.
                                                              Jim.
     From: Pete Aldridge
     To: James Roche
     CC: Dr. Marvin Sambur
     Sent: May 16, 2003
     Subject: RE: Boeing

       Great. According to Paul's schedule he will not be back 
     until Tuesday. I will set it up for then.

     From: James Roche
     To: Pete Aldridge
     Sent: May 16, 2003
     Subject: RE: Boeing

       Pete/Marv. Boeing will provide us a 15% max profit 
     certification with audit on the green plane. Phil is fighting 
     off attempts by his commercial guys to add economic clauses 
     (with our help). We should have something on Monday morning. 
     Pete, do you want to make the appointment with DepSecDef? We 
     now have a fixed price deal with taxpayer

[[Page S11788]]

     protection against overruns or windfall profits from the 
     plane and/or the mods. Enough already.
                                                              Jim.

     From: James Roche
     To: Marvin Sambur
     Sent: May 13, 2001
     Subject: RE: 767 lease

       Oh shit! PLS fix ASAP. How did Darleen miss this?
                                                              Jim.

     From: Marvin Sambur
     To: James Roche
     Sent: May 13, 2003
     Subject: RE: 767 lease

       Yesterday, I was asked to prepare an enhanced point paper 
     on the 767 lease for the Vice. The number that were given to 
     me from AQ on this enhanced paper were different from those 
     developed for the point paper prepared for you. I questioned 
     these numbers and received fuzzy answers in return. I decided 
     to do the calculation myself using an excel spreadsheet. I 
     found to my dismay that the numbers were correct according to 
     the OMB definitions but very misleading in a true financial 
     sense. The deal was not good from a true financial basis and 
     I briefed the Vice at 7:30PM of the misleading nature of the 
     numbers and advised my people that we needed to get a better 
     deal from Boeing to make this financially attractive.
       Nelson Gibbs reached the same conclusions.
       I need to make sure that in the future our financial 
     calculations are both accurate and business based. I am sorry 
     for not catching this sooner!
                                                             Marv.

     From: Druyun, Darleen., SAF/AQ
     Sent: Wednesday, October 09, 2002 8:17 AM
     To: Roche, James, Dr., SAF/OS; Jumper, John, Gen, AF/CC; 
         Sambur, Marvin, Dr., SAF/AQ; Foglesong, Robert, Gen, AF/
         CV; Wehrle, Joseph H. Jr., Lt Gen, AF/CVA; Plummer, 
         Stephen B., LtGen, SAF/AQ; Gibbs, Nelson, Mr, SAF/IE
     Subject: OSD BRIEF TO LEASING WORK GROUP

       We were asked if we thought the Congress would give us; 
     language on the termination liability coverage. We told them 
     we did not know and would have wait for the FY 03 
     appropriations to be passed by the Congress. Privately I 
     would tell you that the language we asked for is supposed to 
     be in the bill per several telecons from the hill. This is 
     still fairly ``close hold''. Once they digest this material 
     they will reconvene a follow on meeting. Meanwhile we will 
     continue to work this subject with OSD and try to win them 
     over, including OMB. Col DeWillis from SAF/AQQ has an 
     excellent working relationship with the OMB and continues to 
     work closely with them. Will keep you posted.

     To: Wynne, Michael, Mr, OSD-ATL
     Cc: Sambur Marvin Dr SAF/AQ
     Sent: Tuesday, Jul 08, 2003
     Subject: Re: FW: Footnote

       Mike I don't like it. Why? Because we don't agree with the 
     calculation! As important, it fails to give an alternative, 
     lease supportive case where the NPV is positive! If the 
     addition to the footnote added: ``. . . Similarly, if blah 
     blah, then the NPV would favor a lease by $$$.'' As this 
     stands, it is embarrassing to you, me, and the SecDef. Sen 
     McCain and others who oppose the lease will leap to this 
     number! Why is this so hard for you to see, Mike? Further, 
     the footnote misses Pete Aldridge's point that this is a 
     hypothetical since the Air Force doesn't have the BA to enter 
     into such a multiyear contact, even if the Congress bent its 
     rules to do so without limited production!
       Marv, what do you think? Pls get together with Mike to come 
     up with a more palatable and balanced version of the 
     footnote. Jim.
                                               Dr. James R. Roche,
                                       Secretary of The Air Force.

     From: Wynne, Michael, Mr, OSD-ATL
     To: Roche, James Dr SAF/OS
     Sent: Tue Jul 08 17:04:31 2003
     Subject: FW: Footnote

       Jim, I've gotten the 1.9B relegated to a footnote and I've 
     made an agreement with OMB so that we can proceed. You can 
     sign it in the morning if you agree if not I'm not sure what 
     to do. Meeting with DSD went fine. Most are hoping that you 
     refuse to sign. I told them not so fast.
                                                        Best Mike.

     From: Spruill, Nancy, Dr, OSD-ATL
     Sent: Tuesday, July 08, 2003 4:19 PM
     Cc: Spruill, Nancy, Dr, OSD-ATL
     Subject: Footnote

       Mike. This is what I have copied for your convenience.
           Thanks.
                                                            Nancy.

       The footnote is to the sentence that says:
       Applying the A-94 test, it was determined that the net 
     present value of the multiyear lease option and a traditional 
     purchase option results in a NPV favoring a purchase of $150 
     million, as shown in Table 1(1).
       FOOTNOTE: [1] In evaluating the net present value of the 
     lease and purchase options as required by OMB Circular A-94, 
     the Air Force relied on the availability of mulityear lease 
     authority granted by Congress in 2002 Defense Appropriations 
     Act. Had the Congress chosen instead to provide mulityear 
     procurement authority the NPV could favor purchase by up to 
     $1.9 billion. While this information affords a measure of 
     clarity in an equitable comparison of terms and NPV, it is 
     provided with the understanding that multiyear procurement 
     authority was not available and therefore not a viable option 
     for the Administration's analytical consideration.

     From: Sambur Marvin Dr SAF/AQ
     Sent: Tuesday, July 08, 2003 9:58 PM
     To: Roche James Dr SAF/AQ
     Subject: Fw: Tanker Leasing Report to the Congress

       Boss. Just received this from Nancy. It is worth a shot 
     speaking to Robin or are you like me in that you would rather 
     take poison.
                                                             Marv.

     From: Spruill, Nancy, Dr, OSD-ATL
     To: Hodges William Maj Gen (S) SAF/AQQ
     CC: Spruill, Nancy, Dr, OSD-ATL; Schroeder, Wayne, OUSDC
     Sent: Tue Jul 08 21:49;50 2003
     Subject: Tanker Leasing Report to the Congress
     Marv/ Wayne H.

       I believe Dr. Roche is not happy with the compromise. So I 
     believe it is now between Dr. Roche and Ms. Cleveland. As far 
     as I know. we're in limbo. I'm sure something will change 
     tomorrow. But I'm optimist.
           Thanks.
                                                            Nancy.

     From: Hodges William Maj Gen (S) SAF/AQ
     Sent: Tuesday, July 08, 2003 4:51 PM
     To: Sambur Marvin Dr SAF/AQ
     Cc: Spruill, Nancy, Dr , OSD-ATL; Buhrkuhl, Robert, Dr, OSD-
         ATL; Schroder, Wayne, OUSDC: Schoonover, Joanne, Col. 
         OSD-ATL; Jones, Raymond, LTC, OSD-ATL; Nemetz, Robert, 
         Mr, OSD-ATL; Custer Scott MajGen SAF/LL; Christ Gregory M 
         Lt. Col SAF/LLW; Bunce Pete Col SAF/FML; Ryan Jim Lt. Col 
         SAF/FML; Barefield James Lt. Col SAF/AQ; Beierle Mark T 
         Lt. Col SAF/AQ; Corley John Lt. Gen SAF/AQ; Gray Stephen 
         Col SAF/AQ; John Lt Col SAF/AQ Fisher (Email); Murphy 
         Mark Lt. Col SAF/AQ; Canavan Michael F Maj AFPEO/AT; Ted 
         Bowlds (Email); Allen Cheryl Lt. Col SAF/AQQM; Cloud 
         Patricia Lt. Col SAF/AQ; Haenisch Allan Civ SAF/AQQM; 
         Leister William Maj SAF/AQQM; Lively Nancy LtCol. SAF/
         AQQ; Rivard James T Col SAF/AQQM; Stipe Paul Col SAF/AQQ
     Subject: FW: Waiver of Termination Liability

       Dr. Sambur: As you will see below, OMB will support the 
     language OSD proposed if we support adding the OMB text as a 
     footnote. I clipped it from previous emails so you can see it 
     all together here. Mr. Wynne approved.
       Request your approval. (We're ready to go final and send 
     the package to SAF/LL for Dr. Roche's signature.)

     From: Spurill, Nancy, Dr , OSD-ATL
     Sent: Tuesday, July 08 , 2003 4:05 PM
     To: Hodges William Maj Gen (S) SAF/AQQ; Sambur Marvin DR SAF/
         AQ
     Cc: Leister William Maj SAF/AQQM; Buhrkuhl, Robert, Dr, OSD-
         ATL; Schroeder, Wayne, , OUSDC; Schoonover, Joanne, Col, 
         OSD-ATL; Spurill, Nancy, Dr, OSD-ATL; Jones, Raymond LTC, 
         OSD-ATL; Nemetz, Robert, Mr, OSD-ATL
     Subject: FW: Waiver of Termination Liability

       Marv/ Wayne
       Over to you.
       I'm sure Mr. Wynne is willing to talk w/ you.
       I hope you come onboard.
       If you do, I need a clean copy of the report, OMB has asked 
     for one--for their internal use only.
           Thanks.
                                                            Nancy.

     From: Wynne, Michael, Mr, OSD-ATL
     Sent: Tuesday, July 08, 2003 3:55 PM
     To: Spurill, Nancy, Dr, OSD-ATL
     Subject: Re: Waiver of Termination Liability

     From: Robin-Cleveland
     Sent: Tuesday, July 08, 2003 3:33 PM
     To: Michael, Wynne
     Subject: Re: Waiver of Termination Liability

       Yes make it a footnote and we got a deal.

     From: Sambur Marvin Dr SAF/AQ
     Sent: Tuesday, August 26, 2003 7:59 AM
     To: Szemborski, Stanley R., VADM, OSD-PA&E
     Cc: Krieg, Ken, CIV, OSD-PA&E Zakheim, Dov Hon, OSD-COMPT: 
         Roche James Dr SAF/OS; Wynne Michael, Mr, OSD-ATL, McNabb 
         Duncan Lt. Gen AF/XP
     Subject: $2B Issue with PA&E

       Stan: At my staff meeting this morning, my folks again (see 
     email below) reported that PA&E was pushing our folks for 
     sources for the $2B upfront payment for the lease. As I 
     mentioned at our previous meeting on this subject, the AF was 
     told by Mr. Aldridge that this payment would come from DOD 
     ``reserves'' and Aldridge still reiterates that position. In 
     an event it is too early to start the process. In addition, 
     Mr Zakhiem stated at the earlier meeting that he has no 
     ``reserves'' but will seek sources for the $2B from ALL the 
     Services. We can call another

[[Page S11789]]

     meeting (with Aldridge) to addresses the issue if that is not 
     your understanding
                                                             Marv.

     From: Stipe Paul Col SAF/AQ
     Sent: Monday, August 11, 2003 3:54 PM
     To: Sambur Marvin Dr SAF/AQ
     Cc: Corley John Lt. Gen SAF/AQ; Gray Stephen Col SAF/AQ; 
         Barfield James Lt. Col SAF/AQ; Fisher John Lt. Col SAF/
         AQ; Rivard James T Col SAF/AQQM; Hodges William Maj Gen 
         SAF/AQQ; Marzo David Maj SAF/FMCE; Louden Philip LtCol 
         with PA&E
     Subject: Head's Up on Tanker 42B Issue with PA&E

       Sir: Just to keep you in the loop, PA&E is still trying 
     strong-arm tactics with our programmers concerning the $2B 
     funding excursion mentioned in the 767 Congressional Report 
     as an out year option for shaping the budget bow-wave. As you 
     may recall Mr. Wynne told us that the AF should consider this 
     new money. That aside, it is premature (in FY03) to be 
     working a program budgetary change on a program that has not 
     yet been approved. Further, decisions on FY08 actions can be 
     addressed in 2006. Finally, as an operating lease, we would 
     need some indication from Congress that they intend for us to 
     buy these aircraft for a buy-down scenario to become a 
     reality. The report did not commit us to the path, but 
     rather, committed the Department of Defense to exploring 
     options like these in the future if it becomes necessary, The 
     $2B excursion was one such option. We expect AF/XP to bring 
     this issue to your attention. We have already been working 
     with their actions to provide background, and to indicate 
     that this appears to be an initiative from PA&E, not from OSD 
     as a whole, or from AT&L.
           V/R,
                                         Paul M. Stipe, Col, USAF,
                           Deputy Director, Global Reach Programs.

     From: Aldridge, Pete, Hon, OSD-ATL
     Sent: Monday, November, 04, 2002 1:22 PM
     To: Wynne, Michael, Mr, OSD-ATL: Lamartin, Glenn, Dr, OSD-
         ATL: Diane, Ms, OSD-ATL
     Subject: Tankers and B-52's

       Steve Cambone tells me that PA&E is coming out against the 
     tanker lease. Their problem seems to be the infrastructure 
     costs modifying and maintenance facilities to bed-down the 
     767, vice 135s. I do not recall that the KC-10s caused that 
     much problem.
       Also, I need a short paper on the B-52 re-engining study 
     done by the DSB. Apparently, they are coming out in favor of 
     doing this primarily because of the positive impact on the 
     tanker fleet. I understand that the study is in a draft form 
     now.

     From: Aldridge, Pete, Hon, OSD-ATL
     Sent: Tuesday, November 12, 2002 5:11 PM
     To: Cambone, Stephen, CIV, OSD-PA&E Szemborski, Stanley R., 
         RADM, OSD-PA&E
     Cc: Spurill, Nancy, Dr, OSD-ATL; Lamartin, Glenn, Dr, OSD-ATL
     Subject: KC-135 Recap Issue Paper
       Steve/Stan; I just reviewed the KC-135 Recap paper. It is a 
     very good and convincing. Based on the analysis I would 
     support Option 3--Convert the E's to R's, and defer new 
     tanker procurement (or lease).
       In a related issue, the DSB just completed a study on the 
     re-engineering the B-52. Unlike past studies, which showed 
     that this was not cost-effective, this new study took into 
     account the impact on tankers. The result is a much more 
     favorable analysis supporting such a plan. This would further 
     increase tanker availability for other uses. I am to receive 
     a paper and briefing and may have a more definite position 
     soon.

     From: Spurill, Nancy, Dr, OSD-ATL
     Sent: Tuesday, November 12, 2002 9:22 PM
     To: Aldridge, Pete, Hon, OSD-ATL; Link, Jon, Col, OSD-ATL; 
         Wilson, Charles, CAPT, OSD-ATL; Lamartin, Glenn, Dr, OSD-
         ATL; Buhrkuhl, Robert, Dr, OSD-ATL; Aucoin, Cassandra, 
         Ms, OSD-ATL
     Subject: RE: Tanker Leasing

       Sir: Re: tanker leasing, in addition to PA&E, CAIG, OMB, 
     and Comptroller are trying to decide whether to support 
     leasing or not but have not gotten all the information they 
     need yet from AF. AF is suppose to give it to the leasing 
     review panel working group this week.
       Once we get the information from AF it will take several 
     more weeks-the CAIG is the long pole in the tent.
       If we go with the reengining of KC-135Es/converting them to 
     Rs, as you suggest, the purchase vs. lease issue could be 
     addressed much more deliberately in POM 05.
       You can give us further guidance when we see you at 0800 
     Wednesday am.
           V/R,
                                                            Nancy.

     From: Glenn Lamartin OSD-ATL
     To: Pete Aldridge OSD-ATL
     CC: Nancy Spruill; Diane Wright; Jon Link; Charles Wilson
     Date: November 12, 2002
     Subj: B-52 Re-engining

       We are preparing the paper you requested and the short 
     briefing that will make the case. We just got a copy of the 
     DSB task force's executive summary and will work with them to 
     make sure that we get the details right.
                                                            Glenn.

     From: Pete Aldridge
     To: Michael Wynne, Glenn Lamartin, Diane Wright
     Date: November 04, 2002
     Subj: Tankers and B-52s

       Steve Cambone tells me that PA&E is coming out against the 
     tanker lease. Their problem seems to be the infrastructure 
     cost of modifying hangers and maintenance facilities to bed-
     down the 767, vice 135s. I do not recall that the KC-10s 
     caused that much problem.
       Also, I need a short paper on the B-52 re-engining study 
     done by the DSB. Apparently they are coming out in favor of 
     doing this primarily because of the positive impact on the 
     tanker fleet. I understand that the study is in a draft form 
     now.

     

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