(FORTUNE Magazine) – It looked like the end for Rice Aircraft Inc. In August 1989, Bruce J. Rice, chief executive of the $15-million-a-year aircraft fasteners distributor in Hauppauge, Long Island, pled guilty to fraud. A federal judge sentenced him to four years in prison, and the Defense Department forbade government contractors from doing business with the company for five years. But in a comeback of Nixonian tenacity, Rice reclaimed its reputation with a quality program so far-reaching that officials from companies such as Goodyear and Estee Lauder have visited to see how it works. The drama began in 1987, when the U.S. District Attorney's office subpoenaed the company's records. The investigation revealed that Bruce Rice had paid approximately $120,000 in kickbacks to employees at Boeing, Grumman, and other defense contractors to steer business his way. He also falsified the documentation that accompanied some of the fasteners he sold, a serious transgression for an aircraft supplier. Investigators found no problems with the hardware itself. But after his plea, sales plunged to about $5 million. As his lawyers maneuvered to delay his imprisonment, Bruce drafted Paula, his wife of 25 years, into the business. She hardly seemed prepared. A high school history teacher, she was, as she puts it -- taking a deep drag on one of her ever present Kent cigarettes -- ''the model corporate wife. When you go out to business dinners, you get kicked under the table if you talk about the company too much.'' But Bruce drilled her in the nuts and bolts of aircraft fasteners. By the time he went to prison in 1992, she was making the key decisions.

REASONING that their only hope was to radically and visibly transform the company, the couple had launched a total quality initiative in 1990. They let go 11 of their 40 employees. The survivors took classes in statistical process control, time management, and human relations, the last to help them communicate better with clients. Customers were polled regularly to make sure they were satisfied. Paula became a passionate convert. ''Why should only big companies get involved in quality?'' she asks. ''The competitive pressure for small ones is even more intense.'' At her insistence, the company set about becoming the first in its business to earn ISO 9002 accreditation, the highly regarded international standard of quality management. To help pay for the program, Paula, who understood the fine art of grant-writing from her experience in education, applied for and got $47,700 from New York State. The company earned ISO 9002 approval in July 1991. Selling the new Rice Aircraft to its old customers fell to Bill Brunet, the company's pit bull quality-assurance manager, whom Paula hired in late 1990. While Rice's crimes were serious, Brunet realized that customers often thought the wrongdoing was much worse than it had been. So to set the record straight, he hauled out key legal documents when he called on customers and also showed them news clips reporting misdeeds at other defense contractors -- of which there were plenty. With Rice Aircraft, Brunet's pitch went, at least customers could know that if it wasn't clean before, it sure was now.

The quality offensive paid off quickly. The company increased its profit margins from 12% in 1992 to 27% in 1993 without raising prices, cut order cycle time by 50%, and increased on-time deliveries to 98%. The sentencing judge was so impressed by the program that he cited it as justification for reducing Bruce's sentence by one year. One by one, customers signed on again. These days Paula Rice, 48, is in high demand as a lecturer on managing for quality. Despite the sorry state of the aerospace market, Rice Aircraft has kept sales steady and even ekes out a profit, says Paula. In September it will be allowed to sell to government contractors again, which should significantly increase sales and earnings. Will that be enough to assure Rice Aircraft's future? Its reputation for quality, probably its most valuable asset, is largely Paula's achievement. But Bruce, 47, still owns the company, which makes his wife technically his employee. Paroled in March, he refuses to say what part he might play now. And the gender role reversal has put strains on the marriage -- ''I've had to get much more independent, and that's been very hard on him,'' she says. ''Let me tell you, this is definitely not something for the faint of heart. Keeping it together is tough. But I've been a Cubs fan my whole life.''