Boeing outsourced Air Force One work to insolvent company tied to Saudis

News

Patrick Danner

San Antonio Express-News

The Boeing Co. outsourced work on Air Force One aircraft at Port San Antonio to a financially insolvent shell company owned by a foreign government, raising troubling national security questions, a whistleblower alleges in a court filing.

Subcontractor GDC Technics, which was 80 percent owned by the Saudi Arabian government, ultimately didn’t complete interior modifications to the aircraft due to a dispute with Boeing. As a result, the aerospace giant reportedly wants a 12-month delay in the jets’ delivery and $500 million in additional taxpayer funds to cover cost overruns.

The whistleblower also alleges the Saudi government diverted funds earmarked for the Air Force One projects to complete two of its own 787-8 Dreamliner aircraft before it “forfeited and abandoned all interests in GDC” in 2019.

The whistleblower, Ahmed Bashir, a Pakistani-born owner of a now-defunct Wichita, Kan., aircraft-modification company, made the allegations in an Oct. 27 court filing in GDC’s San Antonio bankruptcy case.

GDC filed for reorganization April 26 after Boeing dropped it from the Air Force One contracts.

Bashir has submitted a $312 million claim in GDC’s bankruptcy, an amount he describes in his filing as “estimation of the bill footed by the United States taxpayers as a result of Boeing and GDC’s fraud.” He filed the document on behalf of taxpayers in response to GDC’s objection to the claim.

Bashir’s allegations “amount to nothing more than sour grapes” that his company lost the Air Force One projects, GDC says in its objection. Bashir’s Emerald Aerospace lost the contracts due to its own financial and legal problems and failures in the bidding process, GDC says. Bashir’s lawyer disputed those charges, saying the allegations have nothing to do with Emerald.

GDC has not filed a response to last week’s court filing. Two of its bankruptcy lawyers didn’t respond to an email seeking comment Thursday.

Qui tam lawsuit

Bashir originally filed a whistleblower lawsuit, or qui tam case, against Boeing and GDC in April 2019 in federal court in Washington state. It came a year after he filed an “ethics complaint” with Boeing.

Qui tam lawsuits are filed under seal so the federal government can conduct its own investigation without the defendants’ knowledge. In January, the U.S. government decided not to join Bashir’s lawsuit, but reserved the right to intervene at a later date.

That case has dragged on without much activity. Bashir, though, has amended his lawsuit and it’s currently in the hands of Justice Department attorneys to determine if the government wants to intervene, according to his lawyer, Trey Crawford of Dallas.

The amended complaint has not yet been filed with the court. The allegations are mainly directed at Boeing and go beyond what’s in the court filing Bashir submitted last week in GDC’s bankruptcy, Crawford said.

“What happened here blows my mind, to be honest with you,” he said. “And if they do decline (to intervene), then the American people should know that, too, and why.”

Boeing’s lawyers are awaiting filing of the amended lawsuit before filing an answer with the court. A spokeswoman for Chicago-based Boeing declined to comment.

A spokeswoman for the Air Force, which awarded the contracts, said it doesn’t comment on ongoing litigation.

Gore Design

GDC Technics is the successor to San Antonio’s Gore Design Completions, an entity founded in 1988 that installed posh custom interiors in wide-body jets that fly foreign heads of state, corporate VIPs and other bigwigs.

San Antonio economic development officials often spoke of Gore Design, with its high-skill and high-paying jobs, as the kind of employer they sought to attract to Port San Antonio. The Southwest Side campus had been known as Kelly Air Force Base before its closure in 2001.

Gore Design had 600 employees in 2013. That year, after a dispute between its principal owners, it was sold to aircraft-refurbishment management company MAZ Aviation of Riyadh for an undisclosed price.

Saudi Arabia’s Ministry of Finance, through a shell company company called SAAV Completions, acquired 80 percent of Gore Design, according to a court document filed by creditors in GDC’s bankruptcy. MAZ Aviation owned the rest. SAAV is thought to stand for Saudi Arabia Aviation.

Not long after the transaction, the new owners landed completion work for two Boeing 787-8 Dreamliners. Last week’s court filing by Bashir says the aircraft belonged to the Saudi Ministry of Finance. The contracts were for $100 million apiece, he adds. Work also was performed for the Saudis on a Boeing 777ER.

In 2014, Gore Design became GDC Technics. The next year, GDC moved its headquarters to Fort Worth but continued to operate at Port San Antonio, where it occupied 340,000 square feet of hangar space. Its San Antonio workforce shrank considerably, however.

‘Financially insolvent’

GDC has been “financially insolvent and grossly undercapitalized” since the 2013 sale, Bashir alleges. Its only revenue came from work on the Saudi aircraft. The Saudi government “pumped $150 million in ‘equity’ infusions into GDC (over and above the contract prices)” for the completion of those aircraft from late 2013 through July 2016, Bashir adds.

In August 2016, the Saudi government injected $75 million as a “loan.” Bashir says GDC’s entire existence was predicated on the Saudi government’s willingness to continue pumping money into it.

Rather than be stuck with three uncompleted aircraft, the Saudi Ministry of Finance poured another $50 million into GDC in November 2016. Altogether, Bashir says, the Saudi government sank $600 million into GDC.

About that time, it began soliciting work from Boeing, he says. That included a project for an India head of state and additional orders for work on two jets in the Air Force One fleet that have transported U.S. presidents.

Boeing had performed that work in Kansas before moving it to San Antonio in 2014, Bashir says. The company, though, had difficulty finding qualified workers with security clearances to work on the aircraft.

By mid-2015, Bashir says, Boeing began looking for subcontractors and one of its executives encouraged GDC to bid on what’s known as the VC-25A program.

‘Quid pro quo’

During that time, GDC began forming a “quid pro quo” relationship with Boeing, Bashir alleges.

He says his firm was the most qualified contractor but Boeing awarded the contract to GDC. It was paid from $5 million to $10 million a year under the subcontracts.

Meanwhile, Boeing pursued fleet modernization contracts with the Saudi government.

“In other words, Boeing was doling out subcontracts on major U.S. defense projects to GDC at the same time Boeing was soliciting valuable contracts from GDC’s beneficial owner — the Saudi Arabian government,” Bashir alleges.

Saudi Arabia is Boeing’s second largest customer for military defense and arms products, his filing says.

Boeing continued to direct major subcontracts to GDC in 2017 and 2018, including two next-generation 747-8 aircraft — designated VC-25B — for the Air Force One fleet. The Department of Defense awarded Boeing the $3.9 billion contract, with the work performed at Port San Antonio.

Boeing awarded the subcontract about three weeks after it entered into a $22 billion joint venture with the state-owned Saudi Arabian Military Industries, Bashir notes.

Still, he says, the Saudi government’s “sole concern” remained getting GDC to complete the work on its own aircraft.

Financial records submitted in GDC’s bankruptcy show it lost $17 million in 2017 and had negative equity of $88 million at the end of that year. It was an “open secret” that GDC would have failed a requisite financial review and audit, Bashir says, but Boeing never required GDC to submit its financial statements in bidding on the VC-25B contracts.

Boeing knew GDC was insolvent and that its existence was dependent on the Saudi government continuing to inject money into it, Bashir alleges.

Boeing also concealed GDC’s foreign ownership from the U.S. government, Bashir says. Federal regulations prohibit subcontracting national security contracts to an entity controlled by a foreign government, he adds in his court filing.

A former GDC CEO also acknowledged that Mohammed Alzeer, its principal and a Saudi foreign national, was given top-secret Air Force One specifications, Bashir says.

“The unlawful disclosure of this top-secret information is a major breach of national security,” he alleges.

The Saudi government’s last cash infusion in GDC occurred in November 2017, yet it didn’t finish the work on the Saudi aircraft until February 2019, Bashir says.

“During those 15 months, the vast majority of cash coming into GDC ultimately came from U.S. taxpayers in connection with the U.S. Air Force contracts,” he says.

GDC ‘abandoned’

When GDC completed work on the Saudi aircraft in February 2019, its owners flew the jets from Fort Worth to Riyadh.

Immediately after their delivery, Bashir says, ” The Saudi Ministry of Finance completely abandoned and forfeited all interest and affiliation with GDC — and walked away from approximately $193 million in ‘loans’ to the company.”

New ownership, including an entity headed by Alzeer, took over GDC. Insiders then began looting the company, Bashir says.

A group of creditors essentially said the same thing in a June court filing after GDC’s bankruptcy.

“This is a case about a group of insiders that took over an insolvent company in a leveraged buyout, grossly under-capitalized it, and proceeded to drain it to the dregs — all while running up even greater balances on the backs of debtor’s vendors,” the creditors said.

Meanwhile, Bashir says, GDC exhibited “massive performance problems” on the VC-25B subcontract.

It fell behind schedule on the work. Its lack of funding undermined its ability to perform under its subcontracts with Boeing, the aerospace company alleged. Work ground to “a halt even as Boeing tried to infuse cash into the debtor’s business to pay employees and key suppliers,” Boeing added.

GDC terminated

Boeing terminated its agreements with GDC and sued it April 7 in Tarrant County.

“GDC’s failures have resulted in millions of dollars in damages to Boeing and threaten to jeopardize work that is of critical importance to the USAF and the President of the United States,” Boeing said in its lawsuit.

GDC immediately laid off more than 200 employees.

In a counterclaim nine days later, GDC blamed Boeing’s mismanagement for the delays. Boeing also failed to pay outstanding amounts owed to GDC, which it said substantially caused its financial issues.

On April 26, GDC sought Chapter 11 bankruptcy protection. It reported $52.1 million in assets and $66.4 million in liabilities.

GDC received bankruptcy court approval in May to assign its lease at Port San Antonio, 607 N. Frank Luke Drive, to Boeing. The assignment resolved a $1.7 million claim for unpaid rent owed to the Port Authority of San Antonio.

Boeing subsequently sought a one-year delay — until 2025 — to deliver the two new Air Force One jets. It was expected to seek $500 million in additional government funding to cover the increased costs, the Wall Street Journal reported in June, citing people familiar with the matter.

On Aug. 18, Bashir filed his $312 million proof of claim seeking a distribution from GDC’s bankruptcy estate. The claim is solely related to “the minimum amount of damage Boeing itself claims arises from the unlawful selection of GDC as the subcontractor for Air Force One,” he says.

Eight days later, GDC announced it had reached a “global compromise” with Boeing and other creditors after several weeks of negotiations. As part of the compromise, Boeing and GDC each agreed to dismiss their litigation. Also, GDC agreed to $74 million in unsecured claims held by Boeing.

In resolving the disputes, GDC acknowledged Boeing’s more than $300 claims dwarf GDC’s roughly $30 million in claims against Boeing, GDC acknowledged.

The compromise also says the agreement reached with Boeing and GDC allows them to continue their “business relationship” upon GDC’s exit from bankruptcy. That doesn’t include the modification work on the Air Force One aircraft.

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