- The Washington Times - Tuesday, June 11, 2002

Justice Department lawyers are opposing a complex settlement that would end an 11-year-old lawsuit over Richard B. Cheney's decision to kill the A-12 attack jet.

The Navy and two giant defense contractors, the Boeing Co. and General Dynamics, in essence have worked out a deal to end the litigation.

The two companies would provide $2.6 billion in free equipment and services to the Pentagon as well as invest company money over the next 10 years in two large weapons programs, the F-18 Super Hornet and the Virginia-class attack submarine.

But a senior defense official said Justice litigators claim the settlement would only be certain to be worth $250 million, most of that in General Dynamics' providing four free Gulfstream passenger jets.

Justice opposes counting toward the settlement's value the money that the companies would invest in the weapons systems, arguing that there is no guarantee that all the planes and submarines will be bought.

The official said government lawyers, including some inside the Pentagon, want the Defense Department to hold out for $2.3 billion. That figure represents $1.3 billion in "progress payments" made by the Navy over 10 years ago and $1 billion in interest.

"Justice just can't justify the savings, because it's not dollars in the cash register," said a source close to the settlement negotiations.

A final Pentagon decision rests with Deputy Defense Secretary Paul Wolfowitz. In the coming weeks, he will sit down with Navy and acquisition officials and decide whether to recommend the deal to Justice.

"I think we all favor" a settlement, said the senior official, adding that without one, costly litigation would go on for years.

"Wolfowitz will support a settlement if it's on the right terms," the official said. "If it's a fair settlement, he will go with it."

The official said Mr. Wolfowitz wants to make sure the deal is defensible not only to Justice, but also to the White House Office of Management and Budget. The settlement keeps the savings in the Pentagon; the payment of progress payments and interest would go to the general U.S. Treasury.

While defense secretary in 1991, Mr. Cheney canceled the A-12 jet because it was far behind schedule. The companies sued, seeking reimbursement for money spent. The Pentagon countered with a demand for progress payments.

Last year, the firms lost the latest legal round. A Court of Federal Claims judge ruled that Mr. Cheney acted correctly in canceling the A-12. The judge said no cash award was owed the firms, who then took the case to the U.S. Court of Appeals.

Proponents of a settlement say the companies will invest money up front that allows the Navy to enter into multiyear contracts. The Navy would save money long-term at a time when the sea service needs to replace aging weapon systems. The source close to the settlement talks said the Navy would essentially receive eight Virginia-class submarines for the price of seven.

Settlement supporters also say there is no guarantee the Pentagon will ultimately win in a court battle that could last another five years and reach the U.S. Supreme Court.


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