Hercules Fiasco Cites Deficiencies in Tendering System

The story though is one of incredible laxity on the part of those who should know better, namely, the officials within the Department of Local Government and Administrative Services that are entrusted with our money to secure viable, honest and credible contracts on the myriad of products and services handled by this large government entity.

To begin at the beginning though, Australia purchased 12 Lockheed C-130A Hercules transports for the RAAF during the late fifties. Following two decades of service, these aircraft were withdrawn from RAAF active service in 1978 in favour of more modern C-130H aircraft. As is normal procedure, they were handed over to the Federal Government’s Dept of Admin Services for disposal. Two were retained by the RAAF as ground trainers, one at Richmond and one at Wagga where they still serve today.

At the time, the C-130As were in excellent condition and estimated to be worth at least $3m each (all figures in $A in thenyear dollars). The market for them appeared to be fairly strong. Indeed, the US based Parmax Global Jet company wanted to buy all 12 aircraft at an agreed sum direct from the Government. To help organise their finance they used the San Francisco-based law firm of Ford & Vlahos, headed by John J Ford 111. When Parmax had to withdraw due to an inability to raise adequate funding, the Government opened the sale to tender.

Some 20 tenders were received including one of note from an Australian firm headed by Jack Ellis. Ellis’ offer was based on his company working on a commission basis, the more they got the more the government got. Additionally, he had already done a lot of legwork and had a firm purchase intention from both the Mexican Air Force and the UN World Health Organisation to buy the 1 O available aircraft. What happened? The tender was given to the then-unheard-of firm of Ford & Vlahos.

Ford & Vlahos comprised as Directors the previously mentioned John Ford of San Francisco and a Canberra lobbyist by the name of Peter Hocking and his offsider Ken Oliver. That the important tender was given to a firm of attorneys, rather than qualified, practising aircraft brokers with a proven track record for credible business dealings, caused more than a little disquiet amongst those within the industry.

Of note though, and not readily appreciated at the time, was that Peter Hocking had been the Personal Secretary for Senator Reg Withers when he had been heading Admin Services – Hocking knew how government worked and who made the decisions. Across the Pacific, John Ford smelt a windfall. Though the government at the time had no reason to suspect his credibility, Ford had a 30 year history of bad business dealings. In fact he had been litigated against some 21 times for breach of trust, professional negligence, fraud, misrepresentation and conspiracy. He had even served time in jail. Ford & Vlahos then began to market the Hercules on the basis that the Australian Government would receive a flat $1m for each aircraft sold, with them retaining the rest was, as 4 Corners so justifiably said – a licence to print money!

However, little happened and when only one aircraft was sold to France (-208) during the early eighties for $3m, Ford & Vlahos pocketed a nett return of more than $1. 5m after claimed expenses and French agency commissions. The French purchase was also to include a large quantity of spares, which needless to say did not arrive despite the fact that there are presently some 750,000 line items of spares, enough to fill forty five 40ft containers still in storage in Australia. Australian Aviation also believes that some of these stored spares are still usable on our E and H Hercules, so why are they being disposed of in such a way? Could somebody from Mr Beazley’s office please answer that?

Onto Bogota, Colombia, drug capital of the world. In 1984, Aviaco, a little-known local charter company wanted two of the Hercules to use for what they described as internal freight work. US State Department approval to sell the aircraft (all US-built military aircraft need such an approval before on-sale is approved from one user to another irrespective of who originally purchased them) though was withdrawn at the last minute when it was discovered on the operator’s insurance application that they were going to be flying the aircraft into unapproved airstrips in the southern USA! Smelling a drug run, the US properly denied sale approval and the deal fell through.

In the meantime though Aviaco had paid Ford & Vlahos $985,000 in deposit, money that was never seen again by them. You and I lost out too as the two Hercules had already departed Australia for eventual refurbishment in the USA. One made it to Dotham in Alabama and the other to Oakland, California. They still lie there to this day, parked, like their southern cousins, in the backblocks of an aluminium graveyard and accruing more than $30,000 in parking fees in the process. Not only are we liable for these fees but Aviaco is suing the Federal Government for $1m and under the circumstances they may win, proving in the process the incompetence of the Dept of Admin Services in appointing people of questionable record as their approved sales agents.

In this period it is worth noting that the Ford & Vlahos contract had been renewed no less than 11 times and that through his physical involvement as an approved agent of the Australian Government, John Ford was able to extend his own, often dubious, business dealings.

At this stage though, things began to get sticky in Canberra and the name Ford & Vlahos was beginning to get mentioned a little too often for comfort within the corridors of power. They lost the contract and in its place came a new firm, Defence Equipment. What was noteworthy about Defence Equipment was that it was given the exclusive sale rights without a tender even being called and that -you guessed the Directors were no less than Peter Hocking and Ken Oliver, yet again!

Along came the Ethiopian famine and Australia was swept up in an international desire to assist these poor unfortunate people of northern Africa. With full Government backing, indeed the exercise became a personal publicity vehicle for Prime Minister Hawke, $1. 7m was given to Defence Equipment for the refurbishment of two Hercules as Australia’s contribution to famine relief. At the same time a large number of airline, RAAF and ex-RMF aircrew and ground support personnel, backed also by IPEC, volunteered to prepare, operate and crew the aircraft at a minimal charge to ensure that the relief mission was effective.

Instead their generous plan was scuttled and a new company, International Air Aid, won the $1. 5m contract to refurbish and ferry the aircraft on behalf of the government. And the directors of this new company’ve got it: Peter Hocking and Ken Oliver!

Many associated with the refurbishment could not associate the standard of repair though with the funding provided – again Hocking and Oliver had played the system for what it was worth and had once more victored.

Onto Ethiopia and the aircraft became the operational responsibility of the International Red Cross. To operate the aircraft though the IRC signed up another firm and paid them $4m in the process. Integral Air Aid, registered in Cyprus, was the company and its Directors were none other than Peter Hocking and Ken Oliver!

From then on the aircraft flew ad hoc missions and was fraught with crew and support problems as money was not spent on servicing or proper contracted crew repatriations. After only four months in-country, Ken Oliver was accused of taking photographs of a sensitive military area in Ethiopia and was expelled from the region. The IRC cancelled the contract and the Herc was finally withdrawn with Australia’s international image badly tarnished in the process.

It was also shown at the time that the PM’s Department was well aware of the situation but it had deliberately chosen to do nothing against those concerned to avoid bad publicity and future damage to the famine relief campaign. Peter Hocking and Ken Oliver are now residing at Noosa, they are in business again and, like before, will, probably profit from other people’s misfortune and gullibility.

It is also worth noting that Ford & Vlahos were also given the contract to sell the ex-RAN fleet of Grumman S-2 Tracker ASW aircraft. Today these once proud machines sit rotting at Nowra. Fortunately, there is at least a relatively positive ending to this incredible tale of bureaucratic deceit and incompetence. The Trackers are now in the hands of a reputable Australian aviation agent, Hookway Aerospace and their disposal prospects look good. The Heres are also now hoping to be sold within the foreseeable future and are being marketed by Military Aircraft Sales, again a company run by experienced and credible people.

As for those inside the Dept of Local Government & Administrative Services who made the key decisions at the time they are being investigated by the Commonwealth Police and only time will record their fate.

Have the people within the bureaucracy learnt from this incredible fiasco? We would like to think so, but, in speaking with a number of senior officers of the Department this writer was amazed to find that one very senior spokesman could not, even today, accept that all these Hocking/Oliver front companies were not interrelated! Like they say, when the bureaucracy feels threatened it closes ranks in a manner more complete than almost any other establishment.