Pentagon faults Air Force for air show contract

Pentagon inspectors accused the U.S. Air Force yesterday of improperly awarding a $49.9 million contract to a television tycoon from Radnor, suggesting that uniformed officials were too cozy with the man they hired to juice up air shows with high-glitz video productions.

The Defense Department's Office of Inspector General said in a 251-page report that the Air Force had improperly steered the December 2005 contract to Strategic Message Solutions L.L.C., of Plymouth Meeting, a since-defunct company run by Edward Shipley.

"The investigation found that the December 2005 award to SMS was tainted with improper influence, irregular procurement practices, and preferential treatment," the Inspector General's Office said.

Shipley, through his attorney, said the contract was awarded appropriately. He noted that prosecutors had declined to pursue a criminal case and that the government had settled Shipley's own counter-lawsuit.

Shipley, 50, is a military aircraft enthusiast and pilot in his own right who made his fortune in direct-TV marketing. In recent years, he has flown his vintage military plane in Air Force air shows. In 2004, he became an honorary member of the famed Thunderbirds aerial-stunt team, the report said.

The Air Force contract, which was terminated soon after being awarded because of protests from a losing bidder, would have paid Shipley's company $49.9 million over four years to create a Hollywood-like video production for Thunderbird air shows, including stadium-size video screens and sweeping music composed by an Oscar-winning conductor, said Shipley's Philadelphia attorney, James E. Beasley.

As the investigative report became public yesterday, the secretary of the Air Force announced disciplinary action had been taken against five of its personnel, including Maj. Gen. Stephen Goldfein, who at the time the contract was awarded was commander of the Air Warfare Center at Nellis Air Force Base in Nevada, home of the Thunderbirds.

"I am deeply disappointed that our high standards were not adhered to in this case," Secretary of the Air Force Michael W. Wynne, who had requested the Inspector General's investigation, said in a statement announcing the disciplinary action. "This is not how the Air Force does business, and we are taking steps to ensure this doesn't happen again."

The Inspector General's Office found no criminal wrongdoing and noted that federal prosecutors in Nevada had declined a year ago to pursue criminal charges despite their own investigation.

The report, however, criticized officials for choosing Shipley's company, which was formed nine months before winning the contract, saying it was "an entity with minimal facilities, equipment, staff and experience."

"In short, SMS was a skeleton operation without the resources needed to undertake a contract effort of this magnitude," the Inspector General's Office said.

The report, which redacted a number of names, including Shipley's, said the president of Strategic Message Solutions "had a longstanding relationship with senior Air Force officers and members of the Thunderbirds."

One of the losing contractors had submitted a $25 million bid. When that contractor complained to the U.S. Government Accountability Office, it set off a cascade of events. The Air Force terminated Shipley's contract, the Inspector General's Office probe was launched, criminal investigators got involved, and Shipley himself filed a lawsuit against the government.

Beasley said Shipley had done nothing wrong and was frustrated by the affair, which has dragged on for several years.

Beasley flew to Nevada about a year ago with Shipley to be interviewed by FBI agents and federal prosecutors there, and officials did not pursue the matter, the lawyer said.

Beasley said Shipley's innocence was further underscored by the fact that he received a "seven-figure" payment from the Justice Department late last year to settle a lawsuit that Shipley had filed.

The Air Force had terminated the contract Feb. 16, 2006, soon after the competing bidder filed a GAO complaint.

Eleven days later, on Feb. 27, 2006, Shipley sued the government in U.S. District Court for the Eastern District of Pennsylvania, alleging theft of intellectual property.

In his lawsuit, Shipley, an experienced professional air show pilot of modern and vintage aircraft, detailed his extensive interaction with Air Force officials dating back to 1998.

He was the one who came up with the whole idea of jazzing up the Thunderbirds' shows with massive Jumbotron screens, music and more, Beasley said.

Shipley's pitch to Air Force officials included a presentation in 2003 that he put together "on his own dime," Beasley said. The officers enthusiastically agreed to pursue it, said Beasley, who, like Shipley, also owns and flies vintage military aircraft.

But as the project plan grew and Air Force contracting officials became involved, Beasley said, the Air Force pushed for the work either to be done in-house or put up to bid.

"And Shipley's like, wait - this is my idea. You can't put this out to bid," Beasley said. So Shipley put in a competitive bid - and won.

The Inspector General's Office report suggested that Shipley won the contract because of his connections and relationships: Goldfein was in charge of the Thunderbirds at the time and, according to the report, aggressively promoted Shipley's bid.

Goldfein, in the words of the report, "vigorously disagreed" with the inspectors' assessment when interviewed in January. He denied that he "purposefully orchestrated an award to SMS."

The report also noted Shipley's relationship with Air Force Gen. Hal Hornburg, who retired in late 2004. Hornburg was a consultant to Shipley's company in 2005, the Inspector General's Office said. Hornburg has declined to comment.

Beasley said yesterday that Hornburg was unpaid, which he said means Hornburg was in compliance with a federal rule restricting retirees from working for government contractors the first year after leaving their posts.

The Justice Department settled the lawsuit with Beasley and his client around September 2007 with a written release absolving him of any wrongdoing, Beasley said.

"They gave Shipley a release that basically covered him from anything," he said. "They paid him a pile of money."

"They [government officials] don't pay someone more than seven figures if they've done something wrong," Beasley said. "And they don't give someone a release if they've done something wrong."