VSI, 2 Ex-Employees Plead Guilty to Falsifying Reports
VSI Corp. of Culver City pleaded guilty Friday in U.S. District Court in Seattle to four counts of falsifying and omitting test results for fasteners used in commercial and military aircraft, and will pay $18 million in damages, fines, civil penalties and costs of prosecution.
Two former VSI employees also pleaded guilty to one count of conspiracy to defraud the government. James E. Ryan, former quality assurance manager at VSI’s Voi-Shan plant in Chatsworth, and Aram Marderian, a former Voi-Shan metallurgical lab supervisor, face prison sentences of up to five years and $250,000 in fines.
The case was the biggest ever initiated under the federal whistle-blower statute.
Ryan and Marderian also agreed to cooperate with federal authorities in an ongoing investigation of Voi-Shan “that involves other possible employees,” U.S. Atty. Mike McKay said in a telephone interview Friday.
VSI, a subsidiary of Fairchild Industries Inc. of Chantilly, Va., is the largest supplier of the nuts and bolts that hold aircraft engines and other components in place. Its customers include the U.S. military, Boeing, McDonnell Douglas, Lockheed, General Electric, Pratt & Whitney and Northrop.
In pleading guilty, VSI admitted to one count of conspiracy and three counts of mail fraud. As part of the resolution of the criminal charges, it will pay the government $2.5 million in fines and $1 million in investigation costs.
The $14.5-million civil settlement was a record amount for suits filed under the False Claims Act, which allows individuals to sue on behalf of the government and to share in any recovery of damages.
The criminal charges, filed by federal prosecutors in Seattle Wednesday, grew out of a civil suit that three former Voi-Shan employees filed in 1988. McKay said the government’s investigation uncovered a 15-year scheme to skip required tests and falsify test results. The falsified tests were recorded as having been approved by a fictitious “Inspector No. 11.”
“There is no evidence that any airline tragedy resulted from bad bolts or fasteners from Voi-Shan,” said McKay. “But it sure could have happened.”
Donald Parker, Fairchild’s general counsel, said the problems at Voi-Shan, which accounts for as much as $50 million of VSI’s $150 million in annual sales, have been corrected.
“There will be no further shortcuts,” Parker said, adding that Voi-Shan would “cooperate fully” with the government’s investigation.
McKay said the whistle-blowers--former Voi-Shan employees Tom Runion, Gary Heywood and Paul Hertog--will receive at least $2.175 million of the $14.5 million civil settlement. The exact amount will be determined by a federal judge in Los Angeles, where the civil suit was filed and kept under seal until Friday.
However, Will Ramsey, an attorney representing Runion, Heywood and Hertog, said he will object to the settlement and seek a higher figure.
