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Can America’s air safety watchdogs police aviation fraud?

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Can America’s air safety watchdogs police aviation fraud?

  • kees torn/Flickr
  • Chaosheng Shi (center). Warren Johnson (left), former president of Moog Aircraft Group, shakes hands with Li Jian of New HongJi (right). 2015.
    Photo courtesy Chaosheng ShiChaosheng Shi (center). Warren Johnson (left), former president of Moog Aircraft Group, shakes hands with Li Jian of New HongJi (right). 2015.

A tide of defective and possibly counterfeit airplane parts has been making its way into U.S. aircraft unreported and unchecked, according to senior aviation specialists and whistleblower attorneys.

Earlier this spring, a government audit of the Federal Aviation Administration (FAA)—the agency responsible for ensuring airline safety—said the FAA had consistently failed to alert federal law enforcement authorities about suspect parts installed in U.S. airplanes.

The scathing audit by the Department of Transportation’s Office of the Inspector General (OIG)—the first one in 20 years—also charged the agency had closed investigations without ensuring that counterfeit and improperly manufactured parts (SUPs) were removed.

The FAA has since pledged to comply with the audit recommendations. But interviews with former FAA inspectors and other experts raise questions about whether federal law enforcement authorities can cope with the threat posed by a global aviation parts manufacturing industry that has spread to emerging markets like China and India, where many of the fake or defective parts identified in investigations have originated.

The safety threat posed by fraudulent parts is likely to increase unless federal authorities become more aggressive in combating it, the experts told The Crime Report.

“We’re outsourcing so much work into those regions (that) the propensity for risk increases exponentially,” said Michael Dreikorn, a former FAA safety inspector who helped set up the agency’s first Suspected Unapproved Parts (SUP) program in the 1990s.

Some argue that an equally serious problem is a laissez-faire culture in which the agency effectively allows the commercial aviation industry to police itself.

Whenever the FAA suspects fraud, under its own guidelines, it is required to refer the case to federal law enforcement authorities.

“However, the FAA is loathe to actually refer people for criminal enforcement,” said Mary Schiavo, a former Inspector General of the Department of Transportation (DOT).“They just don’t do it.”

Agency officials respond that the FAA’s current oversight program assures the safety of the American flying public.

“In rare instances where the FAA determines SUPs have entered the system, we issue corrective measures that mandate timely action by affected owners and operators,” the FAA said in an emailed response to The Crime Report’s questions.

The trials of a whistleblower

But a Crime Report investigation suggests that despite the sharp rebuke by the OIG earlier this year of FAA practices, ongoing attempts by a Chinese whistleblower to warn both authorities of a potential grave risk to the flying public continues to fall on deaf ears.

In 2016, a supply chain manager at Moog, a U.S. aerospace company that supplies flight control systems to Boeing, alerted the Federal Aviation Administration (FAA) that he had discovered a Chinese subcontractor was producing improperly manufactured parts.

According to an FAA report obtained by The Crime Report, the agency investigated, but found no evidence of a violation.

Unsatisfied, the whistleblower, Chaosheng Shi, asked for a re-investigation.

During the second investigation, the regional FAA inspector found evidence that improperly manufactured parts had been installed in commercial Boeing 777s around the globe. The same subcontractor, according to the report, had outsourced other critical parts to an unapproved supplier.

What’s more, the subcontractor had fabricated production records.

Under the FAA’s own guidelines, when the agency finds evidence of “suspected unapproved parts” (SUPs), it is supposed to refer them to federal law enforcement agencies for a full examination.

But that didn’t happen.

Instead, despite the evidence produced during the second investigation, the FAA concluded that “all corrective actions have been taken. No further action is required.”

'Accounting error'

Regarding Shi’s suspicion that the subcontractor was using substitute, sub-standard raw materials, FAA accepted the company’s explanation that it was an “accounting error.”

FAA’s investigation relied entirely on Moog’s internal probe into the suspected counterfeiting. But by the time Moog performed its inspection, claimed Shi, the parts that it tested were no longer representative of the batch that had been installed on aircraft a year earlier.

These parts are still in the air today, installed in wing flaps that control descent and speed for safe landing.

As if this weren’t chilling enough, they are what’s known in the industry as “single-point-of-failure” parts—meaning that if they fail, the whole system fails.

According to Shi, as many as 500 commercial airplanes could be affected.

The Moog case illustrates what some experts say is a worrying failure of oversight by the agency tasked with ensuring the safety of commercial airplanes in the U.S., as well as law enforcement agencies that investigate and prosecute unapproved parts fraud.

Some experts cite a relationship between the airline industry, FAA, and congressional oversight committees that has grown too cozy.

While people within the industry insist that manufacturers have a self-interest in keeping the flying public safe, veteran aviation experts are telling a different story—one in which unreported defective parts invade the supply chain unchecked, with no repercussions.

While it is not the FAA’s role to investigate criminal matters, the agency acts as a gatekeeper, deciding which cases are referred to law enforcement. For cases involving commercial aircraft, the Department of Transportation’s Inspector General gets involved, often working with special agents from the FBI. For military aircraft, the Department of Defense, and the Defense Criminal Investigative Service step in.

Some say the FAA is, in effect, enabling an end-run around potential criminal investigations by withholding these types of allegations from investigators.

“If the FAA is not sharing the information with law enforcement, [offenders] are not going to get indicted, because most of the time law enforcement is not going to know about it,” said Ken Gardner, a retired FAA safety inspector who now teaches certification courses for the agency.

Criminal prosecutions against airplane manufacturers are rare; instead, victims and their families have taken to civil courts to pursue false claims and wrongful death suits. Under federal regulations, installing counterfeit or improperly manufactured parts isn’t a crime unless you’ve done it knowingly. The same goes for falsifying records.

But experts allege that the FAA’s lax attitudes allows the manufacturers to shrug away what little scrutiny they might face with a simple response: We didn’t know.

“Sadly, I’ve heard this many, many times,” said Schiavo, the former DOT Inspector General. “There are so many whistleblowers out of Boeing. But the FAA says ‘Boeing looked at it, and they found it not to be a problem,’ and they pretty much rubber stamp [it].

“They don’t make Boeing go and inspect all the planes. And I suppose a lot of these are out in the hands of end-users now. It’s pretty typical.”

Dreikorn, the former FAA inspector, concurs.

“The fact of the matter is, as a result of this whistleblower’s actions, we know of 273 nonconforming parts installed in the spoilers of Boeing 777 aircraft,” he said. “We are expected to rely on analysis and testing from the very companies that caused the problem.

“Trust must be earned, and the FAA’s aircraft certification office in Seattle has shown itself incompetent in ensuring the largest airplane manufacturer in the U.S. is capable of controlling its suppliers.”

Dreikorn added: “I rest no easier simply because the FAA says I should.”

Asked by The Crime Report to examine the FAA’s report on Shi’s complaint, another former safety inspector, who asked that his identity be withheld, said, “This investigation should have also involved the DOT Office of Inspector General for falsification of production records which are required documentation.”

The inspector was particularly concerned about the hundreds of critical parts that were installed in wing flaps that did not undergo stress relief or proper hydrogen relief treatment (baking).

“Carbon embrittlement is a big concern due to the fact that turbulence can change the normal stress loads that can cause a catastrophic failure,” he told The Crime Report. “The FAA should have followed up with Boeing to gain information of their notice to customers who had those parts installed on their aircraft.”

But the defective parts never even made it onto the FAA’s Unapproved Parts Notification database, which issues warnings to aircraft owners, operators, manufacturers, maintenance organizations, and parts suppliers about potential risks.

The notifications system is also accessible to the public.

Boeing provided the following response to The Crime Report:

The safety of the flying public is our primary concern, and any allegation related to safety is thoroughly investigated. In late 2016 the U.S. Federal Aviation Administration investigated several allegations related to Moog Aerospace and confirmed two were substantiated.

Moog, working with Boeing, had already assessed these two issues and taken all necessary corrective actions. The FAA investigation confirmed that no further corrective action was required.

We refer additional questions to the FAA and Moog.

Failing grades

The May 30 audit by the OIG found that the FAA had consistently violated a 2004 agreement with six federal law enforcement agencies to share reports and investigations about possible defective parts.

“As a result,” the OIG concluded after its two-year review of the agency, “the FAA cannot accurately account for the number of SUPs or track safety-related trends to share with senior FAA management and Federal law enforcement agencies about the risks posed by unapproved parts.”

In response to the audit, the FAA finally did share data with law enforcement authorities on allegedly substandard or counterfeit airplane parts– many of which are currently in use by commercial jetliners flying today.

But the whistleblower’s story also raises questions about whether federal law enforcement is sufficiently aggressive in monitoring possible counterfeiters.

The OIG, which has the authority to conduct criminal investigations, confirmed to The Crime Report that it received Shi’s complaint and had decided not to investigate. But it would not explain on what grounds his complaint was rejected.

The FAA’s defenders argue that the commercial aviation industry itself is better equipped to monitor suspected unapproved parts and remove them if necessary—a laissez-faire approach which they say ensures airline safety.

“Certificate holders (FAA-approved aviation businesses) must protect themselves and their work with or without government help,” said a spokesperson for the Aeronautical Repair Station Association (ARSA), a global trade association for the civil aviation maintenance industry.

“This responsibility is what keeps flying the safest form of transportation.”

Meanwhile, in response to a request from The Crime Report, the FAA issued the following official statement:

The FAA oversees the design and production of hundreds of millions of aviation products and parts each year. More than two decades ago, the agency developed an enhanced Suspected Unapproved Parts (SUP) program, which resulted in a marked decrease in SUP cases. In rare instances where the FAA determines SUPs have entered the system, we issue corrective measures that mandate timely action by affected owners and operators.

FAA inspectors perform follow-up surveillance of all corrective actions that aircraft owners and operators, and aircraft manufacturers and parts manufacturers, take in response to SUP cases.

In Shi’s case, however, the FAA closed out the investigation without reporting the defective parts as ‘suspect.’

Vigilant in the 1990s

Things weren’t always so lax.

The 1990s saw a more aggressive enforcement period following the 1989 crash of Partnair Flight 394, which killed all 55 people on board, and was blamed on defective counterfeit parts and substandard maintenance.

During Mary Schiavo’s six-year tenure as Inspector General, her office led investigations that resulted in over 150 convictions for fraudulent parts.

“There are a few people still in jail as a result of that,” said former FAA inspector Dreikorn, whose SUP team included several FBI agents who led raids on fabricators of unapproved parts.

But the program was disbanded in 2007.

Gardner, who teaches FAA certification courses (including unapproved parts training) at JDA Aviation Technology Solutions, there are fewer agents assigned to the OIG these days, and they are spread thin across all crimes involving transportation.

“If it’s something that’s not going to draw a lot of attention, and it’s not really a safety issue, they’ll just kind of leave it up to the FAA to deal with it,” added Gardner, who also trains law enforcement how to spot counterfeits and falsified records.

But according to independent experts and whistleblowers, law enforcement lacks the expertise to determine what might be a safety threat, and instead has to rely on the industry itself.

Gardner, like Dreikorn, says the risks have escalated in recent years as aviation manufacturers increasingly outsource to developing markets.

“We know there’s a lot of counterfeit parts coming out of China,” he told The Crime Report.

“There’s a lot of Sikorsky [owned by Lockheed Martin] parts, and the problem is, they have the companies over here send all the data, the drawings and specifications and everything for the parts to be made at other facilities in China as a supplier.

“But they don’t stop there. Because they figure there’s money in it, they can actually manufacture other parts and send them over here with false documentation.”

Shi’s case adds a troubling new dimension to the problem of overseas quality control. Last month, a judge denied him U.S. whistleblower protection because he worked in Shanghai.

Nevertheless, ARSA, the aeronautical repair group, argues that companies outside the U.S. have an equal interest in avoiding fake or fraudulent manufacturers.

“A good repair station won’t risk business on risky parts,” the ARSA spokesperson told The Crime Report, noting that non-U.S. firms have access to the FAA’s database, which “allows certificate holders to help ‘police’ the flow of parts with questionable origins or paperwork.”

Some aviation experts point out, however, that the current system fails to account for human nature.

Mike Danko, a civil attorney and pilot who uncovered the role of an unapproved part in a deadly 2014 plane crash, cites what he says is the “well-known” example that “a pilot is never criminally prosecuted unless he is drunk—it doesn’t matter how stupid, reckless he is, or how many people are injured—[and] because that’s so well known, there’s a small group of renegade pilots who say, ‘this is easy—either I’m not going to get the license, or my license is revoked, I don’t care.

“I’m going to continue to fly because—what happens if I get caught?’”

The audit’s findings underline the charges by many of the outside experts interviewed for this article that the FAA itself is in need of an overhaul.

Even if FAA inspectors were inclined to be more aggressive, they currently don’t have the technical skills to perform physical examinations to determine if there is a safety risk.

“The FAA really defers to Boeing expertise,” said Mary Schiavo, noting that the agency even allows the company to self-certify its aircraft.

“The FAA doesn’t have the expertise to match talent with Boeing.” (Boeing has contended in federal court that it is a “representative” of the FAA).

“It’s a paperwork chase,” added Mike Danko, the former pilot. “It’s not quality control, or quality assurance. As a general rule it’s just a record-keeping inquiry.”

Are our planes safe?

Has the FAA’s current approach to counterfeit parts increased the safety risks for the thousands of passengers who fly U.S. jetliners every month?

The FAA and its defenders say it hasn’t.

But last year, after compiling and analyzing National Transportation Safety Board (NTSB) reports, the NBC Bay Area Investigative Unit found that “unapproved parts” had played a role in close to two dozen airplane crashes in the U.S. since 2010, resulting in seven fatalities and 18 injuries.

The majority of the crashes either took place in U.S. airspace or involved U.S. aircraft under FAA jurisdiction, according to an NBC reporter, minus one or two overseas cases referred to the FAA that involved forged FAA tags.

Independent aviation experts think this number may actually be much higher. However, the NTSB refuses to release information on its investigations of major catastrophes that have happened overseas, even when they involved a U.S. manufacturer.

When Danko investigated the 2009 Cessna crash that killed Dr. Ken Gottlieb, he found that an unapproved part had jammed during takeoff, and that Gottlieb’s mechanic had faked an inspection just days earlier. A civil jury awarded Gottlieb’s family over $10 million dollars.

Afterwards, said Danko, “I asked the FAA to investigate. They investigated and found basically no specific violation of any regulation. And that mechanic still has his license.”

As for any criminal investigation, “law enforcement is virtually never interested,” said Danko.

That holds true in Shi’s whistleblower case.

For the past two years, his dogged attempts to alert the OIG, both directly, and through the fraud hotline, have come to nothing. The OIG’s official reply: “We Anticipate No Further Action From Our Office Regarding This Matter And Thank You For Bringing This Information To Our Attention.”

New HongJi, the Chinese company that was found to have produced defective parts and falsified records, continues to manufacture Moog parts for installation onto Boeing military and commercial aircraft. Aircraft Group of Moog, Inc, holds the certificate for these parts— meaning the case falls within U.S. jurisdiction.

“You can explain away an accounting error,” said former FAA inspector Dreikorn.

“But when you have that coupled with forged documents— it means there is no reliability in the system, and then everything that comes out of the system is as far as I’m concerned, suspect.”

Appeal to an irrelevant authority

An FAA investigation—which the OIG audit shows to be unreliable—can also make or break a fraud case.

Take the 11-year, $4.8 billion false claims suit against Boeing and Ducommun for defrauding the U.S. government, which was thrown out on appeal in 2016. The lawsuit claimed that Boeing used off-spec parts in 737 Next Generation aircraft that it sold to the U.S. military (P-8 Poseidon), and then produced false documentation to cover it up.

The judge made his determination based on the fact that Boeing and the FAA both disagreed with the whistleblowers as to how the manufacturing specifications could be interpreted. Because of this wiggle room, intent could not be proven.

“We know it was willful, because after they ‘discovered’ it, they then went back to the company that was making the defective parts, or the non-conforming parts, and they cut a side-deal with them authorizing them to continue doing it in exchange for some price concessions,” William Skepnek, a whistleblower attorney who worked on the case for over a decade, told The Crime Report.

But, he added: “Because the FAA didn’t make a finding, then I guess reasonable minds can differ, and if reasonable minds can differ, well than you can’t prove intent…. which is of course not the law.”

“I don’t think there ever was a criminal investigation. There was a DCIS investigator who was assigned to the case. And the DCIS investigator simply handed it off to FAA, and accepted what FAA did, and did no investigation on his own.”

Skepnek’s team started digging into the case, and “we found that the DCIS investigator had no knowledge of aircraft parts.”

“So there literally was no independent criminal investigation.”

The FAA, in turn, accepted Boeing’s own internal investigation into the matter, said Skepnek. According to Dreikorn, who was engaged as an expert witness by the whistleblowers: “I was able to independently determine that, yeah, Boeing had done some wrongdoing, they had covered it up, and the FAA at the local level was in cahoots.

“And I took it all the way up to the Associate Administrator, and she killed it.”

Skepnek continued: “Ultimately, the federal judge in Wichita determined that because the FAA hadn’t done anything about it, then that meant that the FAA found it was all good.”

The 10th Circuit Court of Appeals also sided with the opinion of Boeing engineers and the FAA.

It might be surprising to the average person that the agency tasked with aviation safety doesn’t perform physical inspections and investigations itself. But according to Dreikorn, most judges are unaware of the fact .

“They think that the FAA is infallible. I’ve stood in front of many state and federal judges, and told them that the FAA system is flawed, and they wouldn’t accept it,” he said.

“And as a lone expert, how can I stand up to the FAA?”

At least 3 or 4 crashes …should have been tolerated, but the fuselage came apart.

The two aviation experts, an engineer, and a former NTSB crash investigator working with Skepnek on the whistleblower case believe that several Boeing 737 Next Generation crashes remain unexplained.

“What our guys said was, and we actually submitted this to the FAA, the real weak spots were in front of and behind the wings. And there are at least 3 or 4 crashes, hard landings, that should have been tolerated, but the fuselage came apart— with some deaths.

And there were a couple of airplanes that came apart in the sky, and nobody lived through that. These were all Next Generations,” said Skepnek.

Dreikorn said he’s been pushing for the National Transportation Safety Board to look into secondary failures for years, which are often more fatal than the primary cause for the accident. “You can’t always prevent the causing event— but make the survivability better.”

“There needs to be more transparency in the industry with these investigations, because they get put under a federal order of stealth— nobody gets to see what’s going on. And even afterwards, it’s under protective order.”

Dreikorn’s FOIA requests to the NTSB for information on crash investigations in Jamaica, Colombia, Kenya, and Ethiopia were all rejected.

“And the reality is, this is taxpayer money, these are our products, the taxpayers’, they should have a right to see what’s going on and be able to get [data]— whether they’re from the media or academia— to look at this stuff so we can understand what’s going on.

“Are our employees, our government employees, working in the best interest of the taxpayers?”

Rep. Peter DeFazio (D-Oregon), ranking member of the House Transportation Committee, who requested the original OIG audit, told The Crime Report that he was concerned that FAA’s Suspected Unapproved Parts Program “had not been reviewed in more than 20 years.”

“Eliminating the serious risk posed by unapproved aircraft parts is a critical safety matter that must be dealt with,” he said, adding that the Inspector General’s findings “confirm the need for improved tracking of suspected parts by the FAA and continued congressional oversight of the SUPs program.”

Weakening federal regulation

That task may now get harder under an administration determined to reduce federal regulation.

DeFazio has been leading a fight in the House against a bill that would privatize the agency’s air traffic control system and remove over 30,000 federal employees from the federal payroll. The bill was rejected by the Senate on Tuesday, and must go to a floor vote before the September 30 deadline for FAA reauthorization.

In the meantime, the FAA Rulemaking Advisory Committee has recommended rolling back several aviation safety standards earlier this month, including those governing pilot training.

Dreikorn believes that change has to begin with the agency’s leadership, noting that the FAA’s new Associate Administrator for Aviation Safety, Ali Bahrami, was plucked straight from an aviation industry lobbying position in June. He was director of the Aerospace Industry Association, and prior to that, he worked at Boeing.

“Until there’s a decision within the organization to behave differently, until the leadership holds the entire organization accountable to perform as they should for public safety, nothing’s going to happen,” he said.

This story appeared in The Crime Report.

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