The Government Accountability Office handed Boeing a huge win, finding that the Air Force improperly awarded a $35 billion contract to build new midair refueling planes to its competitors Northrop Grumman and Airbus.

The Wall Street Journal, Financial Times, and Washington Post all go big with the news on their respective front pages, while The New York Times puts the news on its Business Day cover. The European FT leads with the “heavy blow” for Airbus parent European Aeronautic Defence & Space Company, while Boeing’s hometown Chicago Tribune calls it a “stunning achievement” for its local airplane company. The Air Force doesn’t have to abide by the GAO’s wishes, but the papers agree it’s extremely unlikely it won’t do so.

The papers say the GAO lit into the Air Force, which comes across as bumbling and plain incompetent. Indeed, it’s already in turmoil with the firing of its top two officials two weeks ago after a number of mishaps, including sending sensitive equipment to Taiwan and flying nuclear-armed fighters over the U.S. The Journal and Bloomberg note that the GAO in 2006 sided with the protestors on a $10 billion helicopter contract awarded to Boeing. And

The report found that the Air Force’s actions were done “unreasonably,” that it “conducted misleading and unequal discussions,” and just plain made “significant errors.” The Seattle Times, Boeing’s ex-hometown (where it still has lots of workers) paper, has a nice bullet-point list of the GAO’s findings. And here’s Bloomberg:

“The GAO has identified so many mistakes by the Air Force that it calls into question the credibility of their process for picking weapons systems,” (an analyst) said. “They’re basic things, like whether Boeing’s cost estimates were correct or not.”

The outcome will be a big deal. The Air Force is using ancient refueling tankers, according to the Journal and Bloomberg—their average age is forty-seven years. Jobs are on the line. The Journal says if Boeing wins, more work would likely be done in the U.S. And while it’s worth $35 billion now, it could be expanded to a whopping $100 billion.

Meanwhile, the FT scoops that the defense secretary fired those two top officials in part because the Air Force can’t find more than 1,000 “sensitive nuclear missile components.”

Smoking e-mail

The Journal scoops on A1 that an e-mail between two then-Bear Stearns hedge-fund managers shows that they were talking about shutting down their funds because the market was “toast” just four days before they assured their investors that everything was a-okay. The note will be a key part of an indictment the Journal says may be announced today on fraud charges for the two, Ralph Cioffi and Matthew Tannin.

Ahh, the incriminating “paper” trail. The paper has a nice info-box with a rogue’s gallery of Wall Street biggies brought down by ill-considered electronic correspondence.

The story is just more great work by Kate Kelly, whom we’re sure the Journal is glad it brought back from the movie beat last year. She even gets in to talk with the suspects themselves… err… “people familiar with their view of the events.”

The two say that after thinking about it, they decided the market really wasn’t toast, and thus they weren’t deceiving their investors to cover their rear ends. Their funds, of course, collapsed in June—canaries in the coal mine on the health of Bear Stearns and the financial industry in general.

Um, Iraq was about freedom, not oil, right?

The Times leads page one with a report saying the Western oil giants Exxon Mobil, Shell, Total, and BP are about to be back in business in Iraq, something that’s sure to inflame cynicism about American intentions even if it helps the country modernize the crumbling infrastructure that threatens its (practically) sole source of wealth.

The Times says the short-term, no-bid contracts are “unusual for the industry” and beat out those from companies in Russia and China. We’re sure these deals are absolutely on the up and up.

There was suspicion among many in the Arab world and among parts of the American public that the United States had gone to war in Iraq precisely to secure the oil wealth these contracts seek to extract. The Bush administration has said that the war was necessary to combat terrorism. It is not clear what role the United States played in awarding the contracts; there are still American advisers to Iraq’s Oil Ministry.

Sensitive to the appearance that they were profiting from the war and already under pressure because of record high oil prices, senior officials of two of the companies, speaking only on the condition that they not be identified, said they were helping Iraq rebuild its decrepit oil industry.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.