ELIZABETH VARGAS (ABC NEWS)

(Off-camera) We have an exclusive report tonight about investigations by the FBI and the Pentagon inspector-general, reaching into the highest ranks of the military. They involve Air Force chief of staff General - T. Michael Moseley, the man he replaced and a contract for nearly $50 million worth of equipment that was allegedly unnecessary. ABC's Brian Ross investigates.

BRIAN ROSS (ABC NEWS)

(Voiceover) The investigation involves the Air Force's famed Thunderbirds. Seen by millions at air shows every year. The FBI's investigation is focused on a $49 million contract for an audio/visual system for spectators that the Thunderbirds say they didn't ask for, but that was pushed through at the Pentagon anyway.

SENATOR TOM COBURN (REPUBLICAN

First of all, we don't need it. Number two, it's a complete waste of money. And number three, it is unethical the way it came about.

BRIAN ROSS (ABC NEWS)

(Voiceover) Documents submitted to the Air Force, and obtained by ABC News, show the contract went to a company partially owned by a recently-retired four-star general, Hal Hornburg, who until his retirement, had been in charge of the Thunderbirds and initially suggested the improved audio/visual system.

DANIELLE BRIAN (PROJECT ON GOVERNMENT OVERSIGHT)

In this case, a military officer, one of the highest-ranking Air Force officers, just creates his - his nest to land in when he leaves – leaves the military.

BRIAN ROSS (ABC NEWS)

(Voiceover) General Hornburg, the one in the center, says he didn't get involved in soliciting the contract until a year after he left the military, as provided by law. But a document obtained by ABC News from the US Trademark Office shows General Hornburg was listed as co-owner of the company just six months after he retired. The General says that was an error.

DANIELLE BRIAN (PROJECT ON GOVERNMENT OVERSIGHT)

It's clearly a violation of his one-year cooling off period.

BRIAN ROSS (ABC NEWS)

(Voiceover) The FBI investigation comes after complaints from Air Force insiders with the Thunderbirds and from a rival company whose bid was half the amount. The allegations are that Air Force chief of staff Moseley, and the previous chief of staff, General John Jumper, were directly involved in pushing the contract to a former colleague's company. The contract was canceled after the Air Force general counsel in this e-mail, obtained by ABC News, raised questions about the integrity of the process and referred it for investigation because of the involvement of the four-star general.

SENATOR TOM COBURN (REPUBLICAN

Sounds like a sweetheart deal gone rotten.

BRIAN ROSS (ABC NEWS)

(Off-camera) All of the generals, including chief of staff Moseley, have denied any wrongdoing. And Moseley is remaining on the job during the investigation. We checked with the Navy's flying counterpart, the Blue Angels, to see how many millions they spend for their audio/visual system. It turns out, Elizabeth, they get it for free, not $50 million. For free, from a company that sells ad space before the show.