Air Force Officials Allegedly Hid $112-Million Missile Cost Overruns

The acting secretary of the Air Force and the head of the Pentagon’s management school could face prosecution for allegedly devising an illegal bookkeeping scheme to cover $112 million in cost overruns in the advanced cruise missile program, Pentagon investigators say.

Michael B. Donley, the acting secretary, and Air Force Col. Claude Bolton, commander of the Defense Systems Management College at Ft. Belvoir, Va., knew that money for production of 250 missiles had run out in 1991. Reluctant to stop missile production and ask Congress for more money, they shifted other funds into the program’s account without authorization and then replaced old contracts with new ones to conceal what they had done, according to a report by the Pentagon inspector general’s office and documents obtained by the Baltimore Sun.

Top Air Force officials also ignored warnings from the Pentagon’s comptroller, consciously making decisions that broke the law, according to investigators and Air Force memos.

Their conduct “shows a total disregard for the most basic laws governing the use of appropriations,” said Sen. Charles E. Grassley (R-Iowa), who has urged the Pentagon to send the case to the U.S. attorney general.

As a result of the alleged scheme, taxpayers are likely to pay an extra $80 million for scrapping the old contracts--and the Air Force will end up with fewer missiles than planned.

Both Donley and Bolton insisted that they had done nothing wrong. “We stand by our original decisions,” Donley said in a statement.

The law-breaking alleged by the inspector general’s office involves the Antideficiency Act. It requires agencies to stay within congressionally authorized funding limits.

Under the law, federal officials cannot sign contracts or run up expenses in excess of amounts appropriated by Congress. Unauthorized overspending is a felony and carries a maximum penalty of two years in prison.

In the summer of 1991, Donley, then the Air Force’s top financial manager, and Bolton, who was manager of the missile program, and other unidentified officials reportedly found that sloppy bookkeeping and accounting errors had resulted in the overruns.

They were expecting delivery of the first 250 advanced cruise missiles, but when money for them ran out only 54 were completed.

By July, the account used by the Air Force to buy all of its missiles, including the advanced cruise missile, was empty.

The inspector general’s probe found that the Air Force failed for two years to adjust its books to reflect its commitments to pay at least $112.2 million in cost overruns for the cruise missiles.

In addition, increased costs of $45.8 million in the Titan IV rocket program were not recorded, and another $69 million in adjustments to the MX Peacekeeper missile, Advanced Medium Range Air-to-Air Missile and other related programs were missing from the books, investigators found.