Monday, March 04, 2013

Pratt & Whitney uncovers fraudulent engine-testing scheme: WSJ

March 4, 2013, 12:04 a.m. ET

By ANDY PASZTOR
The Wall Street Journal

Pratt Reveals Faulty Testing


United Technologies Corp.'s Pratt & Whitney unit disclosed it has broken up an alleged fraudulent-testing scheme by a sister United Technologies unit, affecting tens of thousands of engine parts used on popular business jets and turboprop aircraft flown by airlines around the world.

Pratt & Whitney officials said their investigation, which hasn't been reported publicly before, uncovered an elaborate, yearslong effort to doctor metallurgical test results, so as to make certain engine forgings appear to meet extra-stringent standards when they actually fell short. The scheme was allegedly devised and carried out by managers at United Technologies' Carmel Forge Ltd. unit in Israel.

From the mid-1990s to the summer of 2011, when a tip to Pratt from an employee of the Israeli company kicked off the probe, readings from certain tests checking the strength of forgings were systematically altered or manipulated for more than 40,000 disks, according to Jay DeFrank, Pratt & Whitney's chief spokesman. The metal parts in question were used in various engines made by Pratt & Whitney's Canadian operations.

Pratt & Whitney's description amounts to one of the aerospace industry's longest and most-pervasive examples of improper testing in recent years.

Though the parts don't pose any safety hazard, officials of Pratt and United Technologies acknowledged that the extent and duration of the testing irregularities shocked them and prompted a broader reassessment of the engine maker's quality-control systems and oversight of parts suppliers.

The FAA considered the issue serious enough to launch a formal administrative proceeding after being informed by Pratt of its probe. The FAA later concluded that initial allegations of widespread violations of agency rules "were reviewed and confirmed" by Pratt's lawyers. The problems also sparked questions inside Pratt about other possible testing shortcuts at Carmel Forge, and that review is still under way.

Mr. DeFrank said he wasn't aware of another instance in which Pratt & Whitney quality-control experts "have seen falsification of this magnitude." Ongoing investigations could raise the total number of questionable parts.

Carmel Forge, located outside Haifa, Israel, counts as its largest customer Pratt & Whitney Canada, a major engine maker for private planes, business jets and turboprops. The Canadian-made engines power various business jets made by Textron Inc.'s Cessna Aircraft Co., General Dynamics Corp.'s  Gulfstream Aerospace and Dassault Aviation SA, as well as Bombardier Inc.'s Q400 turboprops and smaller aircraft brands including Piper Aircraft Inc. More recently, Pratt & Whitney Canada signed contracts to provide engines for next-generation regional jets.

Mr. DeFrank declined to discuss details about which aircraft models over the years ended up with disks that came from Carmel Forge. "It would be inappropriate to provide a list of customers because we want to ensure all have been notified before they read their names in the media," he said.

In an earlier interview, Kevin O'Connor, United Technologies' vice president of global compliance and the person who led the investigation, said his team worked hard to get to the bottom of the testing irregularities and eventually concluded, in conjunction with aviation regulators, that the parts don't pose a safety hazard.

"From the moment we were informed of the misconduct," Mr. O'Connor said, company officials sought to "determine what happened, inform customers and the requisite government officials and ensure it cannot happen again at Carmel Forge, or elsewhere."

Mr. O'Connor said "new procedures, policies and oversight structures" have been put in place, while Pratt & Whitney compliance teams continue to delve into the Israeli facility's history. "We're still dealing with some of the residual issues," he said.

According to Pratt & Whitney, there haven't been any failures or premature wear involving the disks, and they don't pose "any safety of flight issues or concerns."

The Federal Aviation Administration, which initiated its own formal investigation in September 2011, was kept updated about Pratt & Whitney's findings and follow-on moves.

The FAA sent its own audit team to Israel last May. In a June 2012 letter to United Technologies and Pratt & Whitney, a senior FAA safety inspector said the case involved a violation of agency rules because "the tensile strength testing" of material used to manufacture "major rotating components [of engines] had been compromised." The letter, however, said the FAA was closing the case after determining the company's "corrective actions are considered acceptable."

A spokeswoman said the FAA also hasn't proposed any fines or other penalties, "and the parts are performing as expected."

Still, the issue has been particularly disturbing for Pratt & Whitney officials because since 1994, Carmel Forge has been part of United Technologies, the parent of both companies. United Technologies has shaken up the Israeli operation and replaced top managers. Recently, a Pratt & Whitney team asked current Carmel Forge employees to sign a statement indicating that they weren't aware of any other improprieties.

Eli Yaffe, the former chief executive at Carmel Forge who left last year, didn't return a phone call seeking comment.

Carmel Forge's website says it was founded in 1961 and produces titanium, steel and nickel-alloy parts for aircraft engines. Other customers include aircraft-engine makers General Electric Co. and Honeywell International Inc., along with numerous European industry players.

United Technologies investigators said they focused on adherence to a particular testing standard demanded by Pratt & Whitney Canada, because it was more stringent than those required by the rest of the companies that purchased forgings.

Journalists working for an Israeli current-affairs show called "Uvda," which on Monday is scheduled to air a segment about the plant on Keshet Broadcasting, began looking into Carmel Forge's troubles in recent months.

Pratt & Whitney's management began scrutinizing Carmel Forge in the summer of 2011, prompted by an anonymous complaint from a plant employee alleging widespread irregularities. Within weeks, United Technologies assembled an investigative team and launched an extensive probe, including interviewing employees at the site, reviewing documents and analyzing computer data.

Investigators opted to retest more than four dozen remnants of representative forgings retained by Carmel Forge, including 10 that were sent for outside testing. In addition to the FAA, Pratt & Whitney said, it also informed Pentagon officials and Canadian air-safety regulators.

The upshot of these efforts, according to Mr. O'Connor, was that all the parts produced over the years met basic engineering specifications ensuring their safety, though many weren't properly subjected to Pratt & Whitney's tougher internal testing requirements. "We're not happy about it," according to Mr. O'Connor. "We feel we were misled."

Nearly 50,000 Pratt & Whitney Canada engines are currently installed on roughly 28,000 aircraft—including helicopters—in 200 countries, with total operating time close to 600 million hours in the air. The United Technologies unit is best known for its long history of partnering with European and Canadian turboprop manufacturers and providing engines for midsize business jets.

Source:  http://online.wsj.com

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