Eastern Airlines, already in deep financial trouble, said Tuesday that the company and some of its executives will be indicted on charges of falsifying maintenance and safety records.
It would be the first time that an airline has been criminally charged with violating safety regulations.
The indictment, which is expected to be disclosed officially today, was announced to reporters by Martin R. Shugrue Jr., the airline's court-appointed trustee in bankruptcy. He said he did not know which of Eastern's managers would be indicted.
Late Tuesday, NBC News said it had learned that a federal grand jury had returned a 60-count indictment against Eastern and nine employees.
NBC's report Tuesday said the indictment would name Edward Upton, the airline's former senior vice president of maintenance; Joseph Moser, a former maintenance manager; Thomas Lewis, a regional director, and six supervisors.
Such an indictment would be another major blow for Miami-based Eastern, which filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code in March, 1989. The filing was prompted by a strike five days earlier by the airline's machinists, pilots and flight attendants.
Since then, partly as a result of continuing bad publicity, Eastern has been forced to sell many of its assets, including lucrative Caribbean and Latin American routes, which were bought recently by American Airlines. Eastern says it is losing about $2 million a day, in large part because it is attracting so few business travelers.
Shugrue was appointed as trustee three months ago to run Eastern when the bankruptcy court in New York took control of the airline out of the hands of its owner, financier Frank Lorenzo's Texas Air Corp. The parent company, which also owns Continental Airlines, has since changed its name to Continental Airlines Holdings Inc.
Shugrue told reporters Tuesday that safety violations occurred at several Eastern maintenance facilities before last year's strike and bankruptcy filing.
Shugrue said a federal grand jury had conducted a 10-month investigation of the airline. The indictment comes after the airline was unable to reach a plea bargain agreement with prosecutors.
The government sought to have Eastern plead guilty to a conspiracy charge, Shugrue said, but the airline refused because it might appear to the public that the safety violations were "systemic." The executive insisted that there are no systemwide safety problems at Eastern, arguing that the airline now ranks as the world's safest because it has been so closely scrutinized by government agencies.
Shugrue said prosecutors' demand for a guilty plea to a conspiracy charge "would have called into question this entire airline's present, superior maintenance program and all employees and managers involved in it. We cannot plead guilty to violations of the law for which we find no evidence. The U.S. attorney's office has offered us no evidence of systemic wrongdoing."
The indictment reportedly will include allegations of wire fraud, obstruction of justice and making false statements.
Shugrue said that in recent days Eastern's attorneys and the U.S. attorney for the eastern district of New York, Andrew J. Maloney, have conducted discussions "to attempt to put this investigation and these matters to rest." Such efforts failed, he said.
"Where wrongdoing occurred, particularly at our JFK (New York's John F. Kennedy International Airport) maintenance facility, employees were terminated and or resigned," Shugrue said. "And the Federal Aviation Administration levied substantial civil penalties.
"Accordingly, the company was prepared to acknowledge to the U.S. attorney in the form of a guilty plea that certain irregularities occurred during the pre-strike period, up until March of 1989, with respect to our record-keeping at Kennedy and perhaps other stations."
Last September, Eastern paid $2.9 million to settle FAA allegations of safety violations. As in most such settlements with the FAA, the airline did not admit to violating safety requirements. Eastern has since closed its maintenance facilities at Kennedy.
News reports earlier this month said the grand jury investigating Eastern was expected to indict more than seven current and former employees, including vice presidents of the company. In addition to Kennedy International, violations were said to have taken place at New York's LaGuardia Airport and Hartsfield Airport in Atlanta.
According to those reports, employees were expected to be accused of falsifying maintenance records. They were said to have approved repairs that were improperly performed and, in some cases, not performed at all.
Shugrue repeatedly emphasized that the violations occurred several years ago.
"We will not countenance violations of our maintenance policies," he said. Since the past violations, he said, "the airline has undergone a rigorous inspection by the FAA, by the Department of Defense and (has undergone) our own internal audit."