Culver City Firm Charged With Falsifying Tests of Aircraft Parts : Aerospace: VSI Corp., one of the industry’s largest suppliers of nuts and bolts, came under investigation after former workers filed a $200-million civil suit in May, 1988.
Federal prosecutors Wednesday charged VSI Corp. of Culver City and two employees with falsifying and omitting test results for fasteners used in commercial and military aircraft.
A lawyer representing a company whistle-blower said he expects VSI and the employees to plead guilty today in U.S. District Court in Seattle. He said he also expects VSI to announce, perhaps as early as today, that it has agreed to a record-breaking settlement of civil charges filed against it in 1988 by former employees. The ex-employees alleged that workers at VSI’s Voi-Shan unit in Chatsworth falsified results of required safety tests.
The criminal charges are the culmination of an ongoing investigation of fraud in the aerospace industry by the Northwest Defense Contracting Task Force, a group of agents of the Federal Bureau of Investigation, Internal Revenue Service and various military agencies.
VSI, a subsidiary of Fairchild Industries Inc. of Chantilly, Va., is one of the aerospace industry’s largest suppliers of nuts and bolts.
Prosecutors charged VSI, along with James E. Ryan, former quality assurance manager at Voi-Shan, and Aram Marderian, a former Voi-Shan metallurgical lab supervisor, with conspiracy to commit mail fraud, to make false statements to the government and to defraud the United States.
In a release issued Wednesday, U.S. Attorney Mike McKay said the charges, covering a period from 1975 to 1989, involve false reports to VSI’s customers, including the U.S. military, Boeing, McDonnell Douglas, Lockheed, General Electric and Pratt & Whitney.
The charges against VSI were initiated by Tom Runion, a former Voi-Shan lab technician, and two unidentified former employees, who, in May, 1988, filed a $200-million civil suit against Fairchild in U.S. District Court in Los Angeles. The suit, which remains under seal, alleges that Voi-Shan workers falsified results of required safety tests, including those measuring the stress durability and fatigue of fasteners such as nuts and bolts, according to information released by federal investigators last year.
An affidavit filed by the FBI before federal agents searched the Voi-Shan plant in February, 1989, said that employees used an approval stamp by an allegedly non-existent “Inspector 11” to falsify test results. It also said employees would recycle test forms, white out old numbers, then write in new, phony numbers.
The U.S. Attorney’s office said Runion and the other whistle-blowers would receive a portion of any civil settlement.
A federal spokesman said there would be “further proceedings” regarding VSI today, but wouldn’t elaborate. Donald Parker, Fairchild’s general counsel, said Fairchild is in “advanced stages of negotiation” with the government, but wouldn’t comment further on a possible plea bargain or civil settlement.
However, Will Ramsey, an attorney representing Runion, said an announcement is expected to be made today that VSI, Ryan and Marderian will plead guilty to the criminal charges and possibly that a settlement has been reached in the civil suit.
Ryan and Marderian face prison sentences of up to five years and $250,000 fines. VSI faces liability for false claims to the government plus an undetermined fine.
Ramsey said the amount of the expected settlement of the civil suit would set a record for a suit filed under the False Claims Act, which allows individuals to sue on behalf of the federal government and to share in the recovery of damages. Ramsey wouldn’t specify the amount of the settlement, although he said it would be less than the $200 million the plaintiffs had sought.
But Ramsey said he plans to file an objection to the settlement today because the amount of damages recommended in a federal audit “was much higher.”
VSI says its fasteners are used on almost every commercial and military aircraft. It said in a news release Thursday that its products “at no time have compromised air safety.”
Some of VSI’s customers said Thursday that they had done extensive testing of Voi-Shan’s fasteners and found no problems with the products.
In a statement, Boeing said Voi-Shan’s quality control procedures have been corrected since last year’s search by federal agents and the parts “have not compromised the integrity of Boeing products.”
David Lane, a spokesman for GE Aircraft Engines, a division of General Electric, said that after a 6-month investigation of Voi-Shan’s parts, GE determined that “quality and integrity was not an issue in any part that we had received.”
Jim Bowman, a spokesman for Pratt & Whitney, said the aircraft engine manufacturer began additional testing of Voi-Shan fasteners last year, but “we’ve found no problems.”
Northrop spokesman Mike Greywitt said Northrop found no deficient products from Voi-Shan after testing its stock and parts that were installed on aircraft.
