THE HIDDEN THREAT TO AIR SAFETY A pernicious problem with aircraft maintenance is coming to light. No one wants to talk about it, but substandard and bogus spare parts may be causing crashes.
By Anna Cifelli Isgro REPORTER ASSOCIATE Arieh Coll

(FORTUNE Magazine) – ONE AFTERNOON last October, New York City commuters heard a terrifying traffic report over their car radios. From an Enstrom F-28 helicopter circling over the banks of the Hudson River, WNBC reporter Jane Dornacker began as usual: ''The outbound Lincoln Tunnel looks a lot better for you. In New Jersey . . .'' She paused. Suddenly, listeners heard a frantic ''Hit the water! Hit the water! Hit the water!'' Within seconds the helicopter slammed into the Hudson, killing Dornacker and severely injuring the pilot. Aviation safety officials suspect the crash was caused by a faulty clutch whose parts did not meet government specifications. That on-air accident was unusual, but experts believe its probable cause may fall in a category that is enduring, pernicious, and overlooked: the growing use of substandard and counterfeit parts in the maintenance of aircraft. The dimensions of the phony parts problem are difficult to estimate. Major airlines are closely regulated and their planes are subject to frequent inspections. For that reason, they are probably little plagued by bogus parts. As an airline passenger, your chances of being killed in a plane crash are fewer than one in 230,000; you are 42 times more likely to be killed in a car crash. Air safety experts believe the phony parts issue is potentially more serious among smaller upstart lines and in the privately owned plane and helicopter market, where maintenance may be more casual. Says Edward Wood, director of engineering for the Flight Safety Foundation, a research and consulting group: ''Smaller regional lines face fierce competition and look for the best prices. They may be most ripe for dealers in bogus spare parts.'' The subject is taboo in the airline industry, which fears the bad publicity. Even at the Federal Aviation Administration, which is responsible for ensuring commercial airline safety, no one will speak openly. Says Anthony Broderick, associate administrator for aviation standards: ''We deal with the problem on a case by case basis. I haven't heard about bogus parts in I can't remember how long.'' However, at the behest of the Department of Justice, federal grand juries have been handing down a number of indictments for fraud against parts distributors. The indictments suggest that counterfeit parts have turned up in some commuter airliners and military transport planes. Safety experts believe the problem is more pervasive than the indictments indicate, and that it has become especially serious since 1978, when airline deregulation started spawning more airlines, more flights, and hotter competition among carriers. The spare parts market gets going four or five years after a new kind of airplane has been in service, when the original manufacturer's inventories normally start to dwindle. A plane that is grounded awaiting a replacement part can cost an airline $50,000 a day in lost revenues, so maintenance people turn to independent dealers who stock spare parts that the original manufacturer may have discontinued. What all parts dealers offer are faster delivery and usually cheaper prices on an odd-lot order of, say, two hydraulic pumps or one de-icer than their customers could get from the original manufacturer. As a result, carriers can sometimes end up with bogus parts bought unwittingly from unscrupulous dealers. Says C. O. Miller, the head of Systems Safety Inc., an aviation consulting firm: ''Maintenance is a critical item; cost is a critical item. Put the two together and that opens the door to bogus parts.'' Most dealers are legitimate. They buy parts that have already passed government safety tests in bulk from the manufacturers and resell them to airlines or to airline maintenance companies. They also purchase military surplus at auctions; these parts can be either new or used, but they have also met government specifications. Sometimes a dealer will manufacture or repair a part, but before he can sell it, it must pass FAA inspection. Dealers in bogus parts cut corners in many ways to get around the certification process. They may sell reconditioned parts as new equipment, claiming that they meet FAA standards. They may manufacture items and pass them off as military surplus that has already undergone government testing. Or they may actually counterfeit legitimate parts, stamping them with the logos of the original manufacturers. DETECTING bogus parts is difficult. Small components of larger assemblies, such as a nut or bolt in a 3,600-part jet engine, are the easiest to fake. ''Some are so artfully done, you discover they're bogus only by accident,'' says John Galipault, president of the Aviation Safety Institute, a nonprofit group. Linking bogus parts to the cause of a crash is even tougher. For example, aviation experts cite a number of possible causes for the crash of a Hercules civilian transport plane at Kelly Air Force Base in San Antonio last October, among them human error and a malfunctioning gust lock. This is a device that holds the portion of the tail known as the elevator in place. Government inspectors are trying to determine if the lock was bogus. ''But how do you know what was at fault when you're facing a heap of crushed metal?'' asks a safety expert. The extent of the bogus parts problem among suppliers to the military is just beginning to become apparent. To appease critics of $640 toilet seats in Air Force planes, the Justice Department set up a special unit in 1983 to attack procurement fraud. The unit now counts ten prosecutors who review dossiers collected by 350 investigators. Some suppliers have already been indicted for defrauding the government, and more indictments are expected later this year. A slew of other companies, including two California firms and a Texas outfit, are being investigated for procurement fraud. The government has succeeded in putting the president of Execuair Corp., a parts supplier in Canoga Park, California, behind bars. Last fall a federal court in Oklahoma convicted Laurence Manhan, the president, of selling counterfeit actuators -- parts designed to cut off the flow of fuel to prevent a fire -- to the Air Force for its C-141 personnel carrier. Execuair passed off 56 actuators to the military as originals made by Whittaker Controls, a legitimate manufacturer. Manhan is now serving a five-year prison term. The most celebrated recent case involves Donallco Inc., a North Hollywood, California, parts maker with $18 million a year in revenues. A federal grand jury indicted Donallco in January for selling bogus engine parts to the Air Force for use in C-130 transport planes flown out of Kelly Air Force Base. William Allred, chief executive of the privately held company for the past 30 years, was named as a defendant along with his daughter, Teresa, a director of the company, and two other officers. In February all four pleaded not guilty. The case will go to trial sometime this spring. If they are convicted, Allred and the two officers face up to five years in prison on each of the 15 counts in the indictment and a total of $1 million in fines. Allred is married to a well-known feminist lawyer, Gloria Allred, from whom he was legally separated last year. Her firm continues to represent Donallco. William Allred declined FORTUNE's request for an interview. A lawyer for the company says, ''We believe the company and the individuals will be completely vindicated in court.'' Donallco has been accused of peddling bogus parts before. In the late 1970s, General Signal, whose New York Air Brake division makes hydraulic pumps used in the landing gear of Boeing 727s and 737s and in many other commercial and military planes, sued Donallco for making counterfeit pumps and attaching New York Air Brake nameplates to them. The scam was discovered only when a customer returned the parts to New York Air Brake and the company saw that the pistons in the Donallco pumps were chrome plated instead of solid chrome. Plating peels off with use, which can cause the pump and ultimately the landing gear to fail. A California judge penalized Donallco $100,000; the company has appealed. The government's indictment of Donallco casts rare light on the byzantine workings of the spare parts market. Donallco claimed to carry the largest inventory of aircraft parts ''of any independent supplier in the world.'' The government accuses it of peddling reconditioned and counterfeit parts as military surplus that had already passed strict safety tests. The sales allegedly involved hundreds of aircraft parts, including couplings and shafts for fuel systems in T-56 turboprop engines used in C-130 transport planes. The indictment noted that to prevent visitors -- and presumably FAA inspectors -- from seeing the bogus parts, Donallco employees removed them from the manufacturing floor and hid them. A number of Donallco employees suspected something unsavory was going on. A former worker recalls that a manager bragged that the counterfeit parts were better than the real thing. In a deposition taken for a racial discrimination suit against the company last year, another former employee revealed what he considered to be defects in certain couplings used in the C-130 engines. The couplings did not fit together properly, but the employee was told to put the ! parts through ''as is.'' TO THE EXTENT that he admits a problem exists, the FAA's Anthony Broderick says that bogus parts are ''the product of individuals out to subvert the regulatory system for their own profit.'' That is undoubtedly true, but cracks in the regulatory system don't help. The Aerospace Industry Association is asking the FAA to require dealers to keep records of where they acquire parts and to maintain a history of any parts that malfunction. Canada has such a regulation, but Broderick believes the airlines, not the FAA, should keep track of their suppliers. Early this year Representative Guy Molinari, a New York Republican, introduced a bill in Congress that would increase civil penalties for aviation safety violations from up to $1,000 apiece to as much as $10,000. Rather than risk such hefty levies, airlines would presumably police their maintenance better. The FAA's recent $9.5-million fine imposed on Eastern Air Lines for 78,000 alleged safety violations would have soared as high as $780 million under the bill, for example. Some aviation experts suggest that the manufacturers who make the original parts should be forced to maintain inventories for more than five years. That would go a long way toward alleviating the problem by eliminating the need for many independent dealers. But the manufacturers are sure to fight any such proposal because carrying large inventories is costly. In the end, the industry really offers just the old buyer-beware bromide. New York Air Brake tells customers to buy only from its licensed distributor, whose products the company guarantees to be the real thing. For those white-knuckled fliers who think their viselike grip on the arms of their seats is really all that holds the plane up, bogus parts are one more bit of evidence that they've been right all along.