Aerospace Firm To Pay $37 Million For Fraud

The biggest maker of aerospace fasteners said today it has agreed to plead guilty to conspiracy and pay $37 million in fines and costs to settle federal charges that it schemed for 15 years to falsify test reports on parts.

In a news release issued shortly before a scheduled federal court hearing, VSI Corp. said it agreed to plead guilty to charges of conspiracy to submit false claims. It also agreed to pay a $21.5 million fine and pay the government an estimated $1 million for the costs of the investigation.

To resolve a separate civil case, VSI, also known as Voi-Shan, will make an additional payment of $14.5 million, part of which the government will distribute among three former VSI employees who initiated the investigation.

VSI and two of its managers were to appear in U.S. District Court before Judge Barbara Rothstein to enter pleas.

On Wednesday, the federal government filed its complaint claiming VSI and two of its managers of the test-falsfying scheme, which featured a phantom ``Inspector 11.''

VSI, a Fairchild Industries Inc. subsidiary, was accused of skimping on tests and inspections, sometimes even delivering substandard parts to aerospace manufacturers, including The Boeing Co., to boost profits.

Boeing, one of Voi-Shan's largest customers, said earlier this week that its use of Voi-Shan fasteners ``has not compromised the integrity of Boeing products.''

The company said it has tested all lots of parts received from Voi-Shan, re-inspected a statistical sampling of Voi-Shan parts used over the past 15 years and retested all lots that could be traced to Inspector 11. No problems were found.

VSI and its managers had been charged with conspiracy to commit mail fraud, to make false statements to the government and to cheat the United States.

Eight previous defendants have pleaded guilty, and the investigation is continuing, said Assistant U.S. Attorney Bruce Carter.

``We deplore violations of testing requirements that may have occurred in the past and have taken steps to prevent such conduct from ever taking place again,'' Ben Prescott, president of Fairchild Fastener Group, said in a news release. ``At the same time, we can assure the public that air safety was not jeopardized at any time as a result of testing discrepancies.''

Fairchild Fasteners Group includes the fastener divisions of VSI.

The complaint is the largest to date in a two-year investigation of the integrity, testing and inspection of bolts and other parts used to hold engines, wheels and other key aircraft components in place, Carter said.

Inadequate Voi-Shan parts were found during aircraft assembly and installation and were returned to the manufacturer but investigators do not know whether there have been any imminent safety threats, Carter said.

``No accidents have been traced to Voi-Shan bolts,'' he said.