McDonnell C-17 Procurement Probed : Aerospace: The FBI is checking to see whether regulations were violated in purchase of tools for the cargo jet program.
Federal agents are conducting a criminal investigation into whether McDonnell Douglas officials violated federal procurement regulations in the purchase of multimillion-dollar tools for the Air Force’s C-17 cargo jet program, according to industry sources and government officials.
The FBI is examining McDonnell contracts issued to Jedav Industries Inc., a Detroit-area firm that produced a major tool for the C-17’s wing box, the area that carries the load from the aircraft’s wings to the fuselage, the sources said.
Under investigation are allegations that McDonnell officials issued a contract to Jedav without obtaining valid competitive bids. McDonnell is believed to have conducted its own internal investigation, including the creation of a fact-finding team to examine the purchase, according to government sources.
One of the McDonnell officials involved in the Jedav contract was Spyros N. Papageorge. The firm acknowledged last year that it suspended Papageorge, who exercised authority over the purchase of large tools for the C-17 program, but declined to discuss the circumstances of the suspension.
On Wednesday, McDonnell declined comment on the investigation. Papageorge could not be reached for comment.
Charles Bellestri, Jedav’s owner, said in a brief telephone interview Wednesday that he was unaware of any federal investigation or an internal McDonnell inquiry. He said he did not know why Papageorge was suspended, and he then ended the interview.
Questions about the C-17 production tools, among the most sophisticated and automated in the aircraft industry, have dogged the cargo-jet program. The C-17 is being built in Long Beach by McDonnell’s Douglas Aircraft unit.
In 1990, Pentagon officials ordered McDonnell to inspect every master tool for the aircraft after several of the tools were found to vary from specifications during a random check. The inspection--which was lengthy and costly--found few problems, however.
McDonnell officials, insisting on anonymity, questioned the allegations involving Jedav and Papageorge. If McDonnell overpaid Jedav to do the work, they said, it was only out of desperation to get work done quickly and get the C-17 program back on schedule.
The reasons for Papageorge’s suspension and the results of the federal investigation have not been disclosed.
Separately, McDonnell is facing a whistle-blower lawsuit--still under seal in U.S. District Court in Los Angeles--that alleges that the firm billed the government for flawed C-17 tools rather than seeking refunds from the tool vendors. Those same allegations have been provided to congressional investigators, who are also looking into the matter.
In addition, the civil suit alleges that McDonnell failed to obtain competitive bids for tools. While Papageorge is not a defendant in the case, actions in which he allegedly engaged are described in the suit, according to sources knowledgeable about its contents.
An internal McDonnell audit in 1989 found that a majority of the tools had shortcomings for which subcontractors were not held liable. But McDonnell executives have stated that those issues were resolved, and the matter was closed.
