#9 Jack Blum: Lockheed part 1
#8 Jack Blum: ITT and Chile
#10 Jack Blum: Lockheed part 2
The Corruption Diaries is a journey through the eyes of anti-corruption veterans. Unique perspectives on combating one of the most compelling ethical challenges of our time.
Jack Blum is one of the United States’ leading white-collar crime lawyers. He’s specialised in investigating money laundering, financial crime and international tax abuse. We follow Jack Blum’s career from a small town in the United States to Senate staff attorney, the United Nations, and the frontline of the battle against tax abuse and corruption.
Music is by Blue Dot Sessions under a Creative Commons CC BY-NC licence.

Jack Blum: In some piece of journalism somewhere, a reporter said that I was responsible for bringing down more governments than Lenin! Right?! I said, excuse me, but that wasn’t me, that was a airplane company, I didn’t do it!

Naomi Fowler: This is The Corruption Diaries from the Tax Justice Network. I’m Naomi Fowler.

Jack Blum’s work on the Subcommittee on Multinational Corporations and Foreign Relations was raising all sorts of new questions. The exposure of US company ITT’s election interference in Chile led to more investigations into international banking, oil companies and then, one of the big ones: the disclosure of Lockheed Aircraft’s bribes to foreign governments. It eventually led to the Foreign Corrupt Practices Act, the conviction and imprisonment of Japan’s prime minister, and the abdication of Prince Bernhardt and Queen Juliana of the Netherlands. 

Jack Blum: What had started out as an issue that was limited to one or two companies began to expand into a much larger investigation. We had started with the Subcommittee on Multinational Corporations and Foreign Relations looking at ITT and monies paid to change the election in Chile. And the question then was, you know, was this all unique?

It turned out the Securities and Exchange Commission had done some investigation of ITT, because they were looking at books and records requirements for public companies. And they had subpoenaed lots of documents to find out whether companies were playing around with off the books accounts that would enable them to pay bribes. And they had come up with a lot, a large number of documents, but they really weren’t able to go very far with those documents because they didn’t have the resources, it was something that was sort of a side project and we asked the SEC for the documents and the then Head of Enforcement at SEC, Stanley Sporkin, sent them up, and we started looking at them.

An informant turned up in my precinct, a guy who was pretty unforgettable. His principal occupation was selling aircraft crash parts. Now, when an airplane crashes, the parts can’t ever be used, even if they appear to be perfect because the way the aircraft industry works and airline regulation works is that every part put in an airplane has to be certified. It has to be new. It has to be from an approved manufacturer and a record kept of where that part came from, when it was placed in the, in the plane, placed in service. And what this guy was doing was going around finding parts that were still apparently usable and going and selling them off to people who didn’t want to spend the money for the real thing. He was living in Phoenix, in a suburb of Phoenix, Arizona, and he came forward with the story that he was hired by Lockheed and he had bribed Fran Josef Strauß, the Prime Minister of Bavaria, but who had been Defense Minister of Germany, on behalf of Lockheed, to get Germany to buy the F104 Starfighter. Now the F104 was a terrible plane for Germany. Half of them crashed. Pilots were killed. It was a disaster. And the question for the Germans was, why did we buy a plane that was that inappropriate for Germany?

Lockheed developed the plane in a very short time in response to the Korean War. The Russians had MiGs and we simply didn’t have – that is the U.S. didn’t have – anything to really respond to those MiGs and defeat them in aerial battles. So Lockheed came up with this F104 and it was designed as a day, good weather, fighter plane, and people who flew it described it to me as a kind of rocket with controls, that it was very fast, not hugely manoeuvrable, but very effective because of its speed and agility in some respects, and it worked. Lockheed wanted to continue marketing that plane around the world. They made a sales pitch to the Germans. The Germans at the time were looking for what they called a fighter bomber that had, potentially had, nuclear capability. So what we were looking at here was an all-weather fighter, now is supposed to be converted into something that will work in the German environment which is cloudy, rainy, terrible, clearly not clear weather, good weather fighter, and had all of these extra capacities. And, and this was essentially a flying rocket. In the course of the investigation, I had a German Luftwaffe officer explain to me the problem with a plane like the F104 was when the Germans sat down to tell what their requirements were, they essentially proposed that they wanted a wool growing, egg laying cow that flies. It was supposed to do everything and do everything well, and this plane simply couldn’t deliver on that front, and thus it turned into a catastrophe. So the question was, did Lockheed pay bribes to get this plane into action in Germany?

After the informant said, ‘I paid the bribes and I delivered the cash and Lockheed gave it to me and I went to Strauß‘s office and I handed him bags of cash,’ it was kind of important to find out, you know, was this true?!

I spent months in Germany interviewing people in an effort to track down another guy who had been the Lockheed agent in Germany, a man named Gunter Frank Fala. He had been on the Vorstand Weigel Farbenindustrie, had been indicted as a Class A war criminal because of his role in the development of Cyclone B gas, and he was now pretty elusive, I couldn’t really find out where he was or whatever. And I went around talking to various people who might be able to tell me how to get in touch with him and who might know something about what had gone on in Germany with respect to the F104.

The first part of that experience had nothing to do with payment of bribes by Lockheed. It was the discovery that there was a cadre of very senior people who had a missing 12 years from their resumes, who were still running Germany’s armaments industry and defence establishment. And, you know, they’re telling me all about what a wonderful guy Frank Fala had been. And I said, well, why, why are you so happy with him? And he said, well, he decided that he would give the investigators of war crimes, initially give them information about what had happened, but then when the time came to bring some of it to trial, he reversed his testimony and exonerated a lot of the people who had been indicted, and he was a really good guy for doing that, and I thought, oh my God, you know, what have I stumbled into here.

Naomi Fowler: Jack discovered that Gunther Frank Fala was by then very frail and living in a nursing home in Switzerland. He decided to visit Frank’s son who was living in a small town near Frankfurt.

Jack Blum: I got a car from the embassy and a driver who took me out to visit with the son. I thought I’d ask the son about Daddy and, and, you know, his relationship with Lockheed. Well, I arrive at this estate, which is enormous. Brick wall gatehouse. I come into the gatehouse and the gatehouse has, in the German way, these trophies from hunting, stags, horns up on the wall, and they don’t do taxidermy, they put the skull up with the antlers and all. And from there I’m led by some servant to the main house where young Frank Fala is playing the piano and, you know, living, obviously, very well. And we begin to talk. And I ask him if what his father’s relationship with Lockheed was, and he said, yes, it was a business relationship, and all of that. And then I asked him if he knew what his father did during the war and what had happened with his role, his father’s role as a war criminal. And he said, no. I said, well, I’m going to help you out there. I’m going to send you the entire transcript of his interrogation prior to the war crimes trials. And when I got back to Washington, I actually had the archives dig up that translation, because we have an incredible archive of all that, and had them send him a copy of that interrogation. What that said about Germany and how the post war period had been handled was just enormous.

The second experience that was pretty shocking was the meeting I had with General Lieutenant Gunther Rahl who had been the Chief of Staff of the Luftwaffe in post war Germany, and he was fired because he had undertaken a trip to South Africa to talk to them about their nuclear developments. And this was during the Prime Ministership of Willy Brandt and the thing became public and Brandt fired him. So, we got to meet not far from Berchtesgaden, and he was explaining to me how he had been the last defender of Berlin against the Russians flying for the Luftwaffe in World War 2, right?! And to say the least, it was very interesting and illuminating.

When I got back from the trip to Germany where I’d met with all of these former Nazis who were now running defense industries in Germany and were part of the establishment, I had dinner with Hannah Arendt and I said, why didn’t it occur to any of these people that I was Jewish? And why were they so willing to talk about all of this to somebody who might be Jewish? And she said, they haven’t seen a Jew in 30 years, so no surprise, your name could very well be a perfectly ordinary German name.

So, that, that was an introduction to the way the U.S. had handled the problem of dealing with war crimes post World War II. And it’s clear that even though we had war crimes tribunals, of a vast majority of players who had been involved in crimes against humanity, had not only skated, but managed to skate through with fortunes intact and careers that simply went on. It’s a very complicated affair. And it also leaves you with this proposition. When a country goes off the rails as seriously as Germany had, the dilemma of what to do with all of these people who are complicit in things which are ghastly is a dilemma. You can’t just shoot them all.

We tried to test this, this informant’s testimony, and the informant said, ‘and by the way, I have a diary that has all of the dates when I gave money to Strauß when I visited him in his office.’ And he sold that diary to Stern Magazine. It was a big sensation in Germany. So we took his diary and this guy in the German Defense Ministry said, look, I can’t give you immediate access to the records, but you know we keep detailed records of who comes and goes from the minister’s offices, and it turned out that on days when the informant said I was paying a bribe, he wasn’t signed in. On the other hand, there were days when he said ‘skiing in the Alps,’ and he had signed in to the office of the defense minister which meant the diary was a forgery, a complete forgery. So there was no evidence the bribe had been paid to Strauß.

I can recall two years later sitting on a beach somewhere on vacation and all of a sudden I’m reading the story of the Hitler diary and I said to myself, ah ha, the minute I saw the journalist who was behind it, I said, ah ha, this is another forgery and the Times of London is going to get stuck, but badly for endorsing it and saying it’s genuine because there is no way in the world this, this guy is telling the truth.

Naomi Fowler: But this didn’t mean that Lockheed was not involved in bribes…

Jack Blum: In the course of talking to all these people, they said, look, you’re, you’re really wasting your time here in Germany. You should be looking at what Lockheed did in Japan, because that’s really where the trouble was.

Naomi Fowler: The Corruption Diaries is a production of The Tax Justice Network, made by Naomi Fowler and Jo Barratt. Interviews with Jack Blum were recorded over several days at Jack’s home in Maryland by Zoe Sullivan.