Key Douglas C-17 Manager Is Suspended

McDonnell Douglas has suspended a high-level manager who was in charge of purchasing production equipment for the Air Force C-17 cargo jet program in Long Beach, the company acknowledged Wednesday.

It declined to say what prompted its decision to suspend Spyros N. Papageorge. While he is not a defendant, Papageorge is one of the Douglas officials whose actions are described in a federal False Claims Act civil suit filed against McDonnell Douglas in U.S. District Court in Los Angeles, according to sources familiar with the case.

Papageorge could not be reached for comment. A company spokesman declined to say when he was suspended. Company sources described Papageorge as a high-level manager who was in charge of buying many of the advanced, multimillion-dollar tools used to build the aircraft.

The lawsuit against McDonnell is still under a court-ordered seal, but the allegations in the case have been provided to congressional investigators who are probing the C-17 program.

The allegations involve whether the firm improperly billed the government for flawed tools from vendors, rather than seeking refunds from the vendors, according to sources close to the congressional investigation.

In 1989, an internal McDonnell audit found that a majority of the tools in the program contained shortcomings for which subcontractors were not being held liable. The audit report was provided to higher-level C-17 managers at McDonnell, the sources said.

In addition, allegations have been raised by current and former McDonnell employees that some tools were purchased without following company policy requiring competitive bids, according to a company official and the source close to the congressional probe. In some instances, tools were acquired from vendors that had not been approved for the program, they said.

When asked about those allegations, a company spokesman said Wednesday that “under the circumstances, we are not going to comment.”

The tooling problems have been a source of aggravation for the company, though not a major contributor to the program’s significant production delays or to the estimated $700 million to $900 million by which the Pentagon says Douglas is over its contract ceiling.

McDonnell has repeatedly said such estimates are without merit, that it will break even on its existing contracts and that the firm is making substantial progress toward resolving problems on the program.

The House Government Operations Committee is looking into allegations that thousands of rivets were improperly installed in the C-17’s wings by automatic riveting machines at McDonnell--a charge that the company denied this month. The allegation was made by David Barton, a former Douglas employee who testified at a committee hearing that the machines installed the rivets with an improper level of tolerance.

The C-17 tools--massive, automated structures, many costing millions of dollars, that clamp the aircraft in place while it is being riveted--are regarded as some of the most advanced in the aircraft industry.

But they have been a source of controversy in recent years. In 1990, the Air Force ordered the company to inspect every master tool--those used to verify the accuracy of the assembly tools--because the service became concerned that many of the masters were out of tolerance.

The reinspection was ordered after the Air Force found that quality assurance records had been altered, according to an Air Force statement issued last year. But a subsequent inspection found that most of the master tools were within their required tolerances.