Putin Crony Makes Millions from Air Force Contract

Posted November 19, 2014 at 5:00am

A Reuters investigation finds that the Air Force relies on rocket engines made by a company overseen by associates of Vladimir Putin. Documents show a U.S.-Russian middleman stands to make $93 million on the contract.  

“For months, Sen. John McCain has been pushing for details of a murky deal under which a Russian manufacturer supplies the rocket engines used to launch America’s spy satellites into space. At issue: how much the U.S. Air Force pays for the engines, how much the Russians receive, and whether members of the elite in President Vladimir Putin’s Russia are secretly profiting by inflating the price.”  

“A tiny Florida-based company, acting as a middleman in the deal, is marking up the price by millions of dollars per engine. That five-person company, RD Amross, is a joint venture of Russian engine maker NPO Energomash and a U.S. partner, aerospace giant United Technologies. According to internal company documents that lay out the contract, Amross stands to collect $93 million in cost mark-ups under its current multi-year deal to supply the RD-180 rocket engine. Those charges are being added to the program despite a 2011 Pentagon audit that contested a similar, earlier contract with Amross. That deal would have allowed Amross to receive about $80 million in “profit” mark-ups and overhead expenses on RD-180 engines, government documents show. The confidential report of the 2011 audit described the mark-ups and additional charges as improper under U.S. contracting law. Amross, the auditors concluded, was a middleman that did “no or negligible” work. The audit characterized the $80 million in added costs as “unallowable excessive pass-through charges.”  

Told of the Reuters findings, McCain said the Obama administration’s response, he said in a written statement, signals “it is either ignorant of these allegations or unwilling to investigate them. This is unacceptable.”