tively, at the Pentagon. Unbeknownst to
such as the practice of paying farmers not to
Congress and the public, Perry and Deutch
grow crops, but Alexander may be the first
signed off on Augustine's suggestion in time
person in American history to receive a gov-
for the new policy to apply to the merger of
ernment subsidy for not attending the board
Lockheed and Martin Marietta.
meetings of a major corporation.
When this quiet policy shift was revealed
The aura of impropriety surrounding the
to Congress in the summer of 1994 (nearly a
merger payments was further underscored
full year after it was implemented), many
when Newsday's Patrick Sloyan revealed that
eyebrows were raised. Some members of
both Perry and Deutch had been granted
Congress lampooned the merger payments
waivers from government conflict-of-interest
as a boondoggle that benefited weapons
rules in order to rule on Lockheed Martin's
industry shareholders and executives at the
request for merger subsidies. The waivers
expense of taxpayers and those defense
were necessary because both men had lucra-
industry workers who lost their jobs in the
tive financial ties to Martin Marietta prior to
downsizing that accompanied the merger.
joining the Clinton administration in Jan-
Rep. Bernard Sanders (I-Vt.), who joined
uary 1993. Under normal circumstances,
with Rep. Chris Smith (R-N.J.) in an effort to
they would have been required to wait at least
Only the arms
curb the merger payments, dubbed the sub-
a year before ruling on any matter that would
industry receives
sidies "payoffs for layoffs" because their
directly benefit their former employer. Perry
main effect was to finance special compensa-
and Deutch have since left government ser-
$7.9 billion per
tion packages for defense industry executives
vice and continue to profit from the merger-
year in grants,
and board members, while doing little or
and-acquisition trend in the weapons indus-
subsidized loans,
nothing for production workers who lost
try that they helped finance while at the
their jobs in the mergers. (For example,
Pentagon. They have joined several of their
and promotional
Lockheed Martin announced 19,000 layoffs
other former Pentagon colleagues in a ven-
support to help
in conjunction with the LockheedMartin
ture called Global Technology Partners,
Marietta merger.)53
which provides advice and financing to com-
sell its wares on
panies interested in selling or acquiring mili-
Among the more embarrassing revela-
the international
tary and high-technology firms.54
tions in the payoffs for layoffs fiasco was
market.
that $31 million of the $92 million that exec-
Although government subsidies for defense
utives and board members of Martin
mergers have clearly been a bonanza for
Marietta was to receive in special merger
Lockheed Martin, Perry, and Deutch, it is hard
compensation would be paid by the
to determine exactly how much the policy has
Pentagon as part of the new policy of subsi-
cost the taxpayers. According to a December
dizing "restructuring costs." Norman Au-
1998 report by the GAO, the Pentagon esti-
gustine, who went from chief executive offi-
mates the costs of subsidies for seven mergers
cer of Martin Marietta to the top job at
in the defense industry at $856.2 million.55 The
Lockheed Martin within a year and a half of
Pentagon's figure was undocumented and
the merger, received $8.2 million in merger-
almost certainly too low. According to an arti-
related bonuses--of which $2.9 million was
cle by Norman Augustine that ran in the
directly paid for by taxpayers. And Lamar
"Outlook" section of the Washington Post,
Alexander, who ran as a populist, anti-
Lockheed Martin alone has already received
Washington candidate in the 1996 presiden-
over $850 million in merger-related payments
tial election, received a $236,000 bonus
from the federal government. But the unsub-
financed by the government in compensa-
stantiated Pentagon estimate calculated pay-
tion for giving up his position on Martin
ments to Lockheed Martin at less than half
Marietta's board as a result of the merger.
that amount--$405 million. Substituting
Fiscal hawks have long criticized govern-
Lockheed Martin's figure for that of the
ment spending that subsidizes inactivity,
Pentagon would raise the estimate of the total
18