O.C. Firm Will Pay Out $6.8 Million in Settlement
A Garden Grove company that admitted last year to shipping millions of improperly tested aircraft fasteners has agreed to pay the federal government and two former employees a total of $6.8 million to settle the workers’ federal whistle-blower suit.
Air Industries Corp. delivered more than 600 million improperly tested fasteners over a 20-year period to the government and private firms, according to testimony in the case. But no aircraft accidents have ever been traced to faulty parts from the company, and aircraft manufacturers routinely spot-check critical components such as fasteners when they receive them from their suppliers.
Air Industries officials refused to comment Wednesday on the case. An attorney for the company said there was no admission of civil liability.
The civil settlement, made this week, brings to almost $10 million the total paid by Air Industries since it pleaded guilty in September to related federal felony mail-fraud charges in the case.
The former employees, Dan McKay and Tony Danyal, both Orange County residents, will collect 22.5% of the settlement--a total of $1.53 million. They must pay their attorney’s fee from their share. Neither McKay nor Danyal could be reached for comment.
McKay, a six-year employee of Air Industries, spent two years there as a quality-control inspector. During that time, McKay said in his suit, he found metallurgical defects in fasteners in almost 600 separate shipments. He set each shipment aside for further testing, only to discover that a company vice president overrode him and ordered the parts shipped out immediately, said his attorney, William Ramsey, a whistle-blower specialist.
The executive, Daniel Arredondo, Air Industries’ vice president of sales, pleaded guilty in the criminal mail-fraud case last year and was fined $2,500. Arredondo, 54, was also sentenced to six months’ confinement in his Dana Point home and was ordered to perform 150 hours of community service.
Paul Bender, a spokesman for Seattle-based Boeing Co., said Wednesday it would be impossible to try to identify and replace parts it received from Air Industries because shipments from different suppliers are mingled at the factory. A Boeing 747 contains thousands of fasteners.
Boeing has been a major Air Industries client, but Bender was unable to say Wednesday whether the Orange County company still supplies Boeing with fasteners.
One federal source said it is unlikely the government will attempt to bar Air Industries, which employs about 400 workers, from further government contracts.
McKay and Danyal filed their suit in 1992 while still working at Air Industries. They said they had brought their concerns to their supervisors and were told to mind their own business.
The federal whistle-blower law, called the False Claims Act, requires the U.S. attorney’s office to review such suits and to take over cases when it determines the government has been victimized. Air Industries sold fasteners to the Defense Department as well as to civilian aircraft manufacturers.
Information from the McKay and Danyal suit was referred to a federal task force in Seattle that investigates fraud allegations in government contracts, and a criminal mail-fraud charge was subsequently filed against Air Industries and one of its officers in U.S. District Court in Seattle.
Federal investigators raided Air Industries and seized thousands of documents in April 1992, about a month after the whistle-blower suit was filed, Ramsey said.
McKay and Danyal later amended the suit to allege that they were pressured to resign their jobs shortly after the raid took place.
