Safety Threat Seen : Counterfeits Now Nuts, Bolts Issue

Times Staff Writer

Halfway through construction of its new headquarters in South Central Los Angeles, the U.S. Postal Service made a disturbing discovery. At least 20,000 of the nuts and bolts in the building were counterfeit.

So officials ordered contractors to remove all of the substandard, foreign-made fasteners that were masquerading as high-quality, American-made parts.

But the Oct. 1, 1987, Whittier earthquake beat them to it.

During the 5.9 temblor, fasteners holding up five of the building's cement walls snapped. Nearly 100 tons of concrete crashed to the ground, shearing steel beams in the process.

'Would Have Been Killed'

No one was injured, but had the quake occurred just a few hours later, 400 construction workers would have been on the site. "People would have been out there," said Paul Kelly, the building's construction manager. "They would have been killed immediately."

Federal investigators say the Postal Service's experience with counterfeit parts is becoming alarmingly commonplace for both business and government. Over the last 18 months, counterfeit fasteners, ball bearings, valves and circuit breakers have surfaced throughout the nation, and notably where public safety is a vital concern: nuclear plants, commercial airliners, missiles, trucks, buildings, bridges, school buses and even the space shuttle.

"Bad parts is a virus that has contaminated our industrial base," said Rep. Ron Wyden (D-Ore.), who will help lead congressional hearings on the issue expected to begin in February. "Everywhere we turn bad parts are showing up. I think this problem is far greater than anybody ever imagined."

Threat to Safety

Some of those familiar with parts counterfeiting fear a catastrophe in the fields of aviation or nuclear power. The U.S. House of Representatives' subcommittee on oversight and investigations recently concluded after a two-year study of counterfeit bolts, nuts and screws that "it is only a matter of time before a major tragedy strikes." Counterfeit parts, it added, "threaten the safety of every American."

But many administrators in charge of public safety disagree and say a major accident caused by a counterfeit part is unlikely. "This is a very serious issue," said Victor Stello, executive director of operations at the Nuclear Regulatory Commission. "But the potential of a major nuclear accident happening is, at best, fairly small."

Counterfeit parts come in two varieties--cheap imports that bear markings or certificates indicating they were made in America and meet specified standards, and used parts that are refurbished or given a coat of paint and sold as new.

Court records and investigators say counterfeiters obtain their inventory in two ways. They either import them or buy used product from scrap metal dealers and demolition companies.

Whatever the source, counterfeit parts often don't meet the standards that engineers require to ensure safety.

For example, the Boeing Co. discovered early last year that it had installed more than 2,000 allegedly counterfeit ball bearings in its 737, 747, 757 and 767 commercial jets manufactured between April, 1986, and January, 1988.

Engineers for the Seattle aerospace giant tested a sample of the bearings and found defects that could cause them to break.

Fake Etchings

Boeing thought it had bought a brand-name bearing manufactured by Torrington Co., a Connecticut-based ball bearings manufacturer. Etchings on the bearings, which were sold by Alliance Bearing Industries of Van Nuys, said they were made by a Torrington division. But in fact, the bearings were manufactured by IJK, a Japanese company.

The FBI raided Alliance in October as part of a criminal investigation And Torrington has sued Alliance in U.S. District Court in Los Angeles, charging it with trademark counterfeiting and racketeering, among other things.

Alliance has denied the charges but admitted the bearings were not Torrington's. The alleged counterfeiting was the work of one employee, according to Alliance's attorneys.

The Federal Aviation Administration found after a three-month investigation that the ball bearings were used in non-safety related areas of Boeing's planes, such as the doors. But the same kind of bearing is used in several critical areas of an aircraft, including pilot control systems, which are used in changing altitude.

The FAA maintains that commercial airliners are fitted with emergency systems that would compensate for almost any kind of failure caused by a counterfeit part. "It is difficult to imagine a single counterfeit part would cause a crash except in the rarest of circumstances," FAA official Tony Broderick said.

Several people have died in crashes involving private planes that officials determined were caused by defective fasteners--the nuts, bolts and screws that hold together an aircraft. The National Transportation Safety Board's computer database indicates there were 61 aviation accidents between 1984 and 1987 caused by bad fasteners. How many of those fasteners were counterfeited is just now being investigated.

And just last summer, three different military planes at Tinker Air Force Base in Oklahoma experienced engine failure as a result of defective bolts that may have been counterfeit, according to an internal Air Force safety alert. No one was hurt.

Still, no catastrophic accident of any kind has ever been blamed on a counterfeit part. Some officials speculate that most counterfeit parts are so small that investigators might have missed their role in causing a larger component to break down with disastrous results.

"No one has known what to look for until now," said Tommy Grant, a Houston parts supplier and the individual credited with bringing the counterfeit problem to the federal government's attention. "People call me nearly every day now with some new case."

Handful of Fatalities

So far, however, only a handful of fatalities have been directly linked to the breakdown of counterfeit parts.

Construction worker Calvin Davis was among them. Three days before Christmas in 1987, Davis was kneeling on an iron beam getting ready to tighten bolts used to hold together the frame of a General Motors auto assembly plant then under construction in Springhill, Tenn. He was working 65 feet in the air.

Using his body weight as leverage, Davis, 51, checked the first bolt. It broke, causing him to lose his balance. He fell to the ground and died instantly.

Laboratory tests proved the bolt was faulty. The supplier was Metal Building Bolts, a Houston parts distributor that is one of more than 30 companies currently under criminal investigation for allegedly selling counterfeit and substandard parts, according to congressional records. Metal Building Bolts has consistently denied any improprieties.

The federal government has only recently begun to take counterfeiters to court.

Arthur O. Sammons of Canoga Park was one of the first targets. The National Aeronautics and Space Administration had bought thousands of nuts and bolts from his company, A. O. Sammons, in order to build its space laboratory, called Astro I. The lab was scheduled for launch aboard a space shuttle in March, 1990.

But now Astro I is being taken apart because NASA learned Sammons had falsified documents saying the bolts passed certain safety tests. Tests indicated the bolts were defective and NASA says they could have posed a safety threat to astronauts. The lab, says NASA, could have literally started falling apart in the shuttle's cargo bay, setting loose large parts that could have damaged the shuttle. Astro I's disassembly took six months and cost NASA about $1 million.

Sammons, 77, pleaded guilty in November to 43 counts of fraud and making false statements to NASA and was ordered to get out of the aerospace fastener business in six months.

A. O. Sammons is a one-man company that operates out of a condominium garage, according to federal investigators. Sammons has refused repeated interview requests.

NASA has said allegedly counterfeit bolts sold by Lawrence Engineering & Supply in Burbank were removed from the space shuttle Discovery just months before its successful mission last September. The Defense Department has alleged in an affidavit that the company was trying to pass off cheap Japanese bolts as more expensive U.S. parts. Lawrence's clerks told investigators from the Defense Department that they routinely filled in test results on certifications accompanying the bolts even though safety tests had not been performed, according to the Defense Department affidavit. One employee told officials he overheard a supervisor telling employees to "just fill in the blanks." Lawrence has denied any wrongdoing.

"There were thousands of bolts we had to check," said Wiley Bunn, director of quality assurance at Marshall Space Flight Center in Huntsville, Ala. "You can't believe what a mess this has been. The ultimate nightmare."

How does a company like A. O. Sammons get such an important contract with NASA, a federal agency?

The answer is the federal government and state governments often require that subcontracts be awarded to the lowest bidder. Because their product is either a used part or a cheap knockoff, counterfeiters usually can outbid legitimate parts suppliers. Sometimes, as in the case of Sammons, the government does not perform background checks on its suppliers.

Hardly a Bargain

The Houston Metropolitan Transit Authority did business that way until recently, buying all of its nuts and bolts from the cheapest available source. But what the MTA was getting was hardly a bargain. After some of its 1,000 buses kept breaking down in mid-1987, the agency tested its fastener inventory and was startled to learn that 92% was counterfeit. "The bolt distributors were supplying counterfeits and undercutting other companies to get the contracts, " said Bill Larson, an MTA test engineer.

No one can say with any certainty how many companies are in the counterfeit parts trade, but numerous officials interviewed said a conservative guess would be several hundred.

The Defense Industrial Supply Center in Philadelphia, the military's warehouse of spare parts, found out last year that 30% of its inventory of bolts was bogus--some 30 million bolts. But what really shocked defense officials was that the bolts had come from 50 different vendors. "This is fraud on a very wide scale," Grant said.

No other industry has been hit with a wider array of counterfeit parts than the nuclear industry. During the last year, the Nuclear Regulatory Commission has found numerous counterfeit fasteners, pipes, fuses, valves and circuit breakers in the nation's nuclear plants or sitting on shelves awaiting installation.

The magnitude of the fraud perpetrated on the nuclear industry is best illustrated by an internal NRC report written last summer that said at least 56 companies were suspected of counterfeiting. The report was only addressing the counterfeiting of circuit breakers.

The NRC, along with the U.S. Customs Service, has raided nine of the companies so far, all of them in the Los Angeles area. They were allegedly attaching labels from prominent companies such as Westinghouse to used circuit breakers and then selling them as new.

Nuclear plants--like other businesses--buy parts from distributors because either the original manufacturer has stopped making the necessary product or it can't fill the order right away.

The NRC also has reported that more than half of the 110 nuclear plants in the United States currently operating contain counterfeit or substandard bolts, nuts and screws. Some of the parts are in safety-related systems.

Consumer groups say the discoveries call into question the NRC's ability to guarantee the safe operation of nuclear plants as well as the quality of on-site parts inspections that utilities are required to conduct.

"The public is definitely at risk," said Kenneth Boley, a nuclear safety analyst with Public Citizen in Washington, D.C. "The extent of counterfeit parts in nuclear plants is unbelievable."

Bogus circuit breakers and valves have set off the biggest alarms within the NRC because they make up a portion of a plant's safety system that cools reactor fuel with water during an emergency. In a worst-case scenario, a plant could release dangerous radiation if the parts don't work.

Nuclear Plant Affected

Typical of the counterfeit problem was a case last April involving Pacific Gas & Electric and its Diablo Canyon nuclear plant near San Luis Obispo. The Diablo Canyon facility notified the NRC that it had inadvertently installed 60 counterfeit valves. The bad valves were discovered only after they had started leaking.

Closer examinations showed the parts were old, refurbished valves stuck with labels and markings belonging to Henry Vogt Machine Co., a reputable Louisville, Ky., valve manufacturer. PG&E;, which said none of the bad valves were installed in Diablo Canyon's safety system, notes that they were marked with Vogt's name and appropriate parts numbers. "We expected our suppliers to be honest," spokesman George Sarkisian said.

So far, the NRC has only asked utilities to test a tiny sample of their parts inventory in an effort to determine the extent to which safety systems may have been compromised. Consumer groups have criticized the limited scope of the tests.

"The NRC and the nuclear industry are playing Russian roulette hoping a counterfeit or substandard part is not called upon in an emergency," Boley said.

But NRC officials deny the charge. "If a component didn't work, there are other systems that would," Stello said.

Sometime in the next few months, Rep. Wyden said, Congress and the appropriate federal agencies will design a strategy against counterfeiting. He and 50 other congressmen have introduced legislation that would hand out fines of up to $250,000 and prison terms of up to 10 years for selling counterfeit and bogus bolts to industries affecting public safety. More indictments of companies currently under investigation are expected, which officials hope will deter other counterfeiters.

"This is not a problem that is behind any of us or that we're finished with," Stello said. "We're not done. I'm not even sure we have found all there is to find."

Janet Lundblad of The Times' editorial library assisted with research for this story.

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