Corruption, Crime and All Nippon's Tristars

The battle for All Nippon's widebody order was won by Lockheed, to the tune of 21 L-1011 Tristars. However the manner in which the sale was made would lead to Japan's greatest postwar scandal and a major diplomatic incident which struck at the heart of Lockheed and US business practices...

Lockheed's re-emergence as a civil airliner producer in the late 60s was not a lucrative one. In fact in 1971 the company had to accept a $250 million loan guarantee from the US government to avoid bankruptcy. The Tristar, though a fine and technologically advanced aircraft, had sufferred due to its engine manufacturer Rolls-Royce's own near bankruptcy and the fact that it was primarily designed as a medium haul aircraft and therefore struggled to compete against the longer range McDonnell Douglas DC-10. Lockheed was nowhere near selling the 300 Tristars it needed to break-even and the oil crisis had brought most potential customers to their knees. Getting All Nippon to buy Tristars when they had already taken options for DC-10s was undoubtedly going to be a tough sell - yet that is what happenned. How this was done only became clear in 1976.

In August 1972 the president of Lockheed Corporation, A.C. Kotchian flew to Tokyo to arrange a meeting with the prime minister of Japan, Kakuei Tanaka. Tanaka had already been embroiled in various bribery and corruption scandals before he became prime minister in 1972. Kotchian was informed that to get the meeting a "pledge" of 500 million yen (about $1.6 million) was required. Kotchian agreed and lo and behold when Tanaka went to visit President Nixon soon afterwards it was announced that All Nippon were looking at the Tristar. A few months later All Nippon ordered 6 Tristars with a further 8 options. Mission seemingly accomplished? No - this was just the beginning!

In October a further $400,000 was deemed necessary to pay the the president of All Nippon ($300,000) and six Japanese politicians ($100,000). The full "pledge" agreed earlier wasn't actually paid until August 1973. A further $2 million was paid out to others to assist in them making the correct choices.

To ensure that its aims in Japan continued to be met Lockheed went one step further than merely bribing people. It took up the employment of Yoshio Kodama, a distinctly unsavoury character. This man was not only heavily connected with organised crime but after the end of World War Two had even been imprisoned for three years as a Class A war criminal. Needless to say he was also a leader in ultra-nationalist politics. Kodama pocketed about $7 million for his actions which included sending gangs of thugs to disrupt ANA stockholder meetings, classic Yakuza extortion tactics and slandering the ANA president Tetuso Oba who was forced to resign. Kodama even installed Oba's replacement. He was never prosecuted for his actions but was found liable for more than $6 million worth of tax evasion.

Lockheed's actions in Japan were not unique - it had successfully 'sold' L-1049 Starfighters in Europe in a similar fashion. It wasn't until February 1976 that the scandal broke however, when Kotchian himself disclosed it under the questioning of a US Senate Subcommittee on US Corporations Overseas Operations. All in all Lockheed had spent over $22 million on bribing foreign officials.

Tanaka was arrested on July 27, 1976 but not found guilty until October 12, 1983. He wasn't however convicted on bribery, just on violation of foreign currency exchange control laws and he never served his 4 year sentence (due to lengthy appeals and his eventual death in 1993). He even still managed to get re-elected to the diet! In fact Tanaka is still held in high regard by the Japanese who don't seem too bothered by this kind of institutional corruption.

In the US the Foreign Corrupt Practices Act (FCPA) was passed in 1977 largely because of Lockheed's abuses. Lockheed chairman of the board Daniel Haughton and vice chairman and president Carl Kotchian resigned from their posts on February 13, 1976.

And the Tristars themselves? They proved their worth in service with the first, JA8501,  delivered in December 1973 entering revenue service in March 1974. A new crew uniform named 'the Tristar Look' was introduced at the same time. Throughout the 1970s ANA was a purely domestic airline and it wasn't until 1986 that international services began. The first used the L-1011 to fly to Guam. Of ANA's 21 aircraft several left the fleet relatively early. The three eldest aircraft (JA8501-8503) went to Air Lanka in 1981 and the fourth, JA8505 was sold to Gulf Air in 1983. Six others  (JA8506-07, 8510-13) were traded in to Boeing in 1985 (I assume for 767s?) and 5 of those were leased on to Hawaiian Airlines.

The remaining eleven aircraft carried on in service into the 1990s. The last ANA Tristar service was operated, between Tokyo Haneda and Kagoshima, on November 30, 1995 using the 100th Tristar built (JA8509). The Tristars were replaced in service with new Boeing 777s. JA8514, delivered on June 30, 1975, was stored at Mojave on March 30, 1993 and scrapped in 1999.

References

1976 Church, F. Lockheed: Corporation or Political Actor?
Gerber, Jerg; Jense, Eric. Encyclopedia of White-collar Crime
2006. Airliners.net. The ANA L-1011 Story
2011. Quah, John S.T. Curbing Corruption in Asian Countries: An Impossible Dream?