Air Force Bars New Business for Jet Air, Indicted in Fraud Case

Troubled aerospace parts maker Jet Air Inc., up for sale and facing a 31-count grand jury indictment for allegedly defrauding the government, has been suspended by the Air Force from receiving any new federal contracts.

The suspension could last until the legal proceedings against the company, its owner and general manager are completed.

Air Force officials said they notified Jet Air of the suspension Sept. 19, but company attorney Michael J. McCabe said Thursday that he has yet to receive any official notice of the government’s action.

Jet Air has 30 days from receipt of the notice to appeal the suspension, which McCabe said the company will do. According to Air Force spokesman Capt. Miles Wiley, the suspension will become effective Oct. 19.

The action means that Jet Air, which makes jet plane parts, can receive no new government contracts and cannot be given an extension on any existing contract during the suspension period. The length of the suspension will be determined next month, Wiley said.

However, McCabe said the suspension could last the duration of the legal proceedings against the company.

Jet Air’s current military contracts will not be affected by the suspension, Wiley said. Jet Air employs about 240 people and generates annual revenues of about $12 million, about half of which is from government contracts.

Last month, the company, its owner, George T. Straza, and general manager, Joao Jaime Costa, were indicted by a federal grand jury on charges that they falsified documents in connection with a contract to refurbish engine air seals on Air Force F-15 and F-16 jets.

The 31-count indictment charged that Straza and Costa ordered company workers to cover up Jet Air’s failure to complete mandatory quality inspections of the seals.

In addition, the indictment charged the company and the two executives of stealing $25,000 worth of gold from the government by failing to return gold sludge removed from the engine seals as part of the refurbishment process.

Straza and Costa pleaded not guilty to the charges.

In 1984, Straza, a flamboyant businessman with extensive ties to several San Diego politicians, served six months in prison and paid a $690,000 fine to the National Aeronautics and Space Administration after he pleaded guilty to making false statements in connection with a $2.4-million contract to make parts for the space shuttle.

Under an unusual contract with NASA, Jet Air continued to work for NASA, but Straza was barred from working at the firm in any capacity other than a consultant, for which he is paid $350,000 a year.

Earlier this week, the San Diego Tribune reported that Jet Air was for sale for $12 million. Norman Adams, a Newport Beach business brokerage firm owner who is handling the sale effort, said Thursday that the suspension may not hurt his attempt to market the firm.

“Litton Industries and General Dynamics have had problems, and they all seem to get back on the (government contract) list,” he said.