Army Report Cites Airtech International Inc. Fraud

[Guest Nick Schwellenbach]

Airtech International Inc., a major supplier of materials used in the production of composite parts on aircraft, committed fraud on “every aircraft manufacturer in the world” from 1997 to 2005, according to a September 2006 Army memo obtained by both the Project On Government Oversight and CBS News. In addition to committing fraud and paying bribes and kickbacks, the company has threatened the safety of civilians and soldiers who fly on commercial and military aircraft, the memo states.

 

After a four year joint investigation by the Army Criminal Investigation Command and the Defense Criminal Investigative Service, the memo recommends that the Air Force, which is the part of the Defense Department most directly impacted by Airtech, “take action against Airtech to protect DOD interests.” Nearly two years after the memo was sent, the Air Force has still not taken action against Airtech or any of its principals.

 

“In my career investigating allegations of fraudulent acts against the DoD, seldom have I come across a company with such brazen disregard for the safety of soldiers and civilians as well as for the sanctity of laws, regulations and rules,” wrote the Army criminal investigator in the memo.

 

Key findings in the memo include:

 

“During the period Jan 97 through Dec 05, Airtech knowingly supplied nonconforming products to DOD prime contractors.” These contractors make aircraft such as the US Air Force's C-17, F-18 and Joint Strike Fighter aircraft.

 

“Airtech at its own discretion, routinely changes the composition, the manufacturer or the manufacturing process of products without disclosure to its customer, which in most case would require requalification of the product....These products are originally qualified for safety concerns. Changes to the products or processes could result in contaminations to the end product, which could result in the loss of parts or safety issues if the part is put into use.”

 

“Finally, the ability of DOD contractors to pin point the cause of their failed composite parts to an Airtech product is almost impossible. However, Airtech could not be successful in its fraudulent actions if not for the lack of oversight by its DOD customers.”

 

“To this day, despite instances of substitutions at Vought, Airtech remains an approved vendor for DOD contractors like The Boeing Company, Sikorsky Aircraft, Lockheed Martin and Bell Helicopter.”

 

“Airtech violated the Anti Kickback Act by providing goods and services to employees of DOD contractors in exchange for preferential treatment on the purchase of its products.” This includes use of Airtech owner William Dahlgren’s condos in Las Vegas (known as “Highroller Haven”) and Hawaii.

 

After the Army’s investigation, independently the Federal Aviation Administration (FAA) embarked on an investigation of Airtech in 2006, which did not substantiate findings against them. The FAA investigation exhibited textbook flaws in its investigative methods—those methods were criticized in the mid-1990s by a FAA task force. According to the FAA letter, on October 20, 2006, the FAA warned Airtech, whom the FAA had reason to believe engaged in criminal behavior, ahead of time about its investigation and then displayed great deference to what Airtech told them.

 

“[N]ormal FAA inspection and surveillance techniques are not appropriate in cases of fraud or other criminal activity. ...FAA inspectors typically provide advance notice of their inspections to operators. This may not be a problem in the case of operators not engaged in criminal activity, but those who often use the advance notice to move their counterfeit parts, fabricate records, or otherwise conceal their activities,” according to the FAA’s Suspected ‘Unapproved Parts’ Task Force report from 1995.

 

Furthermore, FAA’s referral of the case to DoT OIG criminal investigators indicates that FAA was in possession of information that Airtech may have engaged in criminal activity.

 

“It’s likely the FAA was duped,” said Nick Schwellenbach, POGO investigator. “Its investigation was clearly bungled.”

 

The FAA’s own guidelines on composites indicate that Airtech threatened safety given the Army’s findings that Airtech supplied bogus materials. These bogus materials create the risk of contamination in composite parts, according to the Army memo (see: http://www.tc.faa.gov/its/worldpac/techrpt/artn0657.pdf, pages 34-36).

 

The House Transportation and Infrastructure Committee is currently investigating the Airtech issue.

 

Memorandum for Suspension and Debarment Official regarding Airtech sent to Air Force Suspension and Debarment official, Stephen Shaw, dated September 26, 2006, from Army Criminal Investigation Command-Laguna Niguel, California Fraud Office. Link: http://pogoarchives.org/m/tr/dod-memo-20060925.pdf

 

 

 

Federal Aviation Administration letter to Airtech, November 28, 2006. Link: http://pogoarchives.org/m/tr/faa-letter-20061128.pdf

 

 

 

Rules for Las Vegas condominium “Highroller Haven” owned by William Dahlgren, the owner of Airtech, Link: http://pogoarchives.org/m/tr/highroller-haven-rules.pdf