McDonnell Shakes Up Copter Unit : Fires 2 Purchasing Managers, Suspends 3rd at Troubled Firm

McDonnell Douglas Helicopter Co., which has been under federal investigation for accounting irregularities during the past year, has fired two purchasing supervisors and put a third on suspension, a company spokesman confirmed Wednesday.

The action against the three management officials was taken last Friday because of their “management style and standards,” the spokesman said. He declined to elaborate or say whether the action stemmed from the federal investigations into the firm’s accounting and procurement practices.

The dismissals are the latest upheavals at the helicopter company, which has been stung by a series of disasters since it was acquired by McDonnell Douglas in 1984.

The Army suspended millions of dollars in contract payments this year. The company has fallen behind schedule on its large Army contract for Apache helicopters.

North Korea Sale

Even worse, 87 commercial helicopters were improperly delivered into the hands of North Korea through a company sales agent in West Germany, it was disclosed earlier this year.

McDonnell Douglas identified the three individuals as James Coyne, director of Apache helicopter procurement; Kenneth Schiefer, manager of major subcontracts, and Russell Travis, manager of material at the firm’s helicopter assembly plant in Mesa, Ariz.

Schiefer and Travis declined to comment. Coyne could not be reached Wednesday.

The Army suspended contract payments to the Culver City-based helicopter company last May when “serious charges” of accounting irregularities surfaced. The suspension affected about $30 million in monthly payments.

The Army said the company was charging the government for a variety of unallowable costs, charging twice for some costs and providing for inadequate internal controls over millions of dollars.

Army and Defense criminal investigators are also looking into allegations that the company has conflicting accounting records on certain subcontracts issued in the Apache program.

Although investigators have declined to discuss the 2-year-old case, they have intensified their efforts and federal indictments may be sought.

The Army restored 75% of normal monthly contract payments in August but has continued withholding millions of dollars in monthly payments until the company responds to an audit by the Defense Contract Audit Agency and institutes a number of reforms, according to Maj. General Richard Drenz, program manager of the AH-64 Apache, the largest military program at the unit.

Drenz said in a telephone interview Wednesday that McDonnell could comply with the audit as early as this month, permitting a return to full contract payments in December.

The dispute over costs also led to restrictions on new contracts in the Apache program, Drenz said. The 1986 Appropriations Act contained a clause providing that McDonnell will not receive any fiscal 1986 funding for the Apache helicopter program until it complies with the DCAA audit and makes changes to its accounting system.

As a result of that language, a contract for continuing production of the Apache that was due to be issued Nov. 1 has been held up, Drenz said. McDonnell has received contracts to build 309 Apache helicopter gunships out of a total of 675 units planned in the program.

So far the company has delivered only 52 aircraft, Drenz said. McDonnell fell behind schedule late last year and was given a relaxed delivery schedule. The new schedule called for seven helicopter deliveries in October, but the company only delivered four, Drenz said.

He said that does not represent a major problem because the failure to meet schedule was due to “paper-work delays.”

“I am hopeful they will deliver seven this month and eight next month,” Drenz said. “But we are not going to accept any of them unless they are right. I don’t need the aircraft badly at this point, and I will not accept them unless they are right.”