Contractor Whose Business Model Is Price Gouging the Pentagon Has Powerful Wall St. Backers – David Dayen April 13 2017, 8:59 a.m.


On March 21, first-term Congressman Ro Khanna sent a letter asking the Pentagon’s inspector general to investigate TransDigm, an aerospace supplier he accused of cornering the market on proprietary parts for military aircraft and then jacking up the prices.

The California Democrat charged that TransDigm operates as a “hidden monopolist,” to “enrich a few individual financiers who stand to benefit at the expense of our troops and weapons systems.”

The letter rebounded across Washington and Wall Street. TransDigm stock dropped over 10 percent in two days. The business press highlighted the story; The Huffington Post called TransDigm “The Martin Shkreli of defense contracting.”

In a nation that once saw a senator become president in part because of his investigation of war profiteering — and where memories of the Pentagon buying $640 toilet seats still linger — the story of a greedy corporation ripping off the military seemed to have legs.

But by April 11, TransDigm stock was back up to $236.48, virtually the same level it was at the day before Khanna’s letter. Investors had shrugged off the bad publicity, and the potentially damaging investigation.

It appears that the hedge funds, Wall Street banks, and highly paid executives cashing in on the scheme are confident that they can use the power and influence that comes with big money to prevent public outrage or government investigations from ruining their party.

And so far, they’re right.

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