U.S. Forest Service Airtanker Scandal - Exchange Scheme

Exchange Scheme

In December 1987, the director of Fire and Aviation Management for the USFS instructed Fred Fuchs, Deputy Director of Fire and Aviation, to request that the Department of Defense cooperate with civilian contractors in a plan to obtain surplus military transport aircraft stored at Davis-Monthan Air Force Base in Tucson, Arizona, which could be converted to airtankers. Besides replacing the grounded C-119s, this program was intended to modernize the tanker fleet to all-turbine aircraft.

At the time, Roy D. Reagan was a private aircraft broker representing Hemet Valley Flying Service, one of the Forest Service's contractors, and an operator of C-119s. At a meeting on December 23, 1987, attended by both Fuchs and Reagan, the Air Force was presented with the idea of transferring Air Force C-130As to the Air Force Museum, which would then exchange the C-130As with Hemet Valley's grounded C-119s, since the latter aircraft could be considered "historic" aircraft. However, at a subsequent meeting with representatives of the Air Force Museum, Air Force officials reacted negatively to the idea of such an exchange.

Fuchs and Reagan then met with representatives of the General Services Administration (GSA) who suggested that the exchanges be conducted without going through the Air Force Museum, and instead have the Forest Service become directly involved. In this version of the plan, the Air Force would declare that the aircraft were "excess property" and transfer them to GSA, who could then legally make the planes available to other government agencies, but with the provision that any agencies receiving them would be required to retain ownership. This plan was agreed upon, and Fuchs was given responsibility for coordinating the exchange program for the Forest Service. He did not, however, discuss the plan with the Forest Service's Office of General Counsel. The letter authorizing the program on behalf of the Forest Service stated that it complied with various provisions of the federal regulations, when in actuality it did not. In addition, Fuchs provided bills of sale to the contractors, transferring actual ownership of the planes to the companies, in violation of the applicable regulations, as well as the provisions laid down by the GSA. Further, Fuchs told his USFS superiors that the transfer of ownership had been approved by the GSA when in fact it had not. In the ensuing criminal trial, three Air Force generals testified that they were not aware that the government would be losing title to the aircraft; if they had, they said, they would not have approved the program.

Initially, four airtanker operators were represented by Reagan and participated in the exchange program: Hemet Valley Flying Service, Aero Union, TBM, Inc., and Hawkins and Powers. Because only a select number of contractors were provided aircraft, and because the program was not publicized nor were the contracts and aircraft put up for bid, accusations of favoritism followed.

T&G Aviation of Chandler, Arizona became aware of the program from one of its competitors (T&G was operating eight older Douglas DC-7s at the time). Concerned that this gave its competitors an unfair advantage in obtaining Forest Service firefighting contracts, T&G officials contacted Fuchs, who told them that no more aircraft were available. The company then contacted several congressmen for assistance, and eventually received three C-130s. In exchange, T&G provided a DC-7B to the Pima Air Museum, an SNB-5 to Planes of Fame and a UH-19B to the Milestones of Flight museum at Fox Field.

The aircraft, ultimately 22 C-130As and six P-3s, ended up being distributed to six contractors. Twelve of the C-130s came from the "ready-reserve national air fleet" stored at Davis-Monthan Air Force Base in Tucson, Arizona, and 16 were retired from Air Force Reserve units and delivered to Pinal Airpark in Marana, Arizona, where they were processed out and transferred through the exchange program. As part of the deal, since Reagan acted as broker on behalf of the companies, he was paid a commission by them in the form of ownership of four of the C-130As, which he subsequently sold for personal profit. The contractors paid nothing for the aircraft, but agreed to perform the conversions and install the fire retardant dispersal equipment at their own cost. The operators then had to competitively bid for the contract at a low enough price to be awarded a year-long contract for fire suppression missions.