High Crimes and Misdemeanors; Ethics and corporate reform

Sept. 1, 2002
High Crimes and Misdemeanors Ethics and corporate reform

By Stephen P. Prentice

The current pressure on corporate executives that threatens to bring both civil and criminal penalties against them, brings to mind similar threats to air carrier management and licensed airframe and powerplant technicians.

The recent past brought to light the heavy hands of U.S. attorneys and district attorneys threatening and bringing criminal charges against those thought responsible for aircraft accidents. We all recall Valujet, Alaska Airlines, and the actions against commuter companies. However, there are few types of aircraft mishaps where criminal investigators should be allowed to take over accident investigations.

Laws do not make people honest or ethical. These qualities develop from our parents and advance or erode due to influences in our lives.

Criminal penalties are nothing new in the air carrier business. I recall the action taken in the Eastern Airlines cases. Valu-Jet followed along with threats in the Alaska Airlines accident as well. The raids by U.S. marshals and other law enforcement people in the Sunjet-Payne Stewart accident also come to mind.

It is argued by some that the threat of criminal prosecution will not produce better performance on the job. Many believe it could have the opposite result. Technicians already know that the lives of passengers and flight crews depend on their work. This is more than sufficient to instill quality in their work ethic.

Recent air carrier accidents have brought pressure to have corporate executives personally certify and approve their aircraft for return to service after inspection. The theory is that if the CEO or vice president of maintenance were under the gun of personal liability for the quality of inspections they would make sure their underlings did a good job.

Fast forward now to the corporate misdeeds we are all reading about in the papers today: excessive pay plans, accounting fraud, financial falsification. Conspiracies abound everywhere the SEC (Securities & Exchange Commission) looks. New regulations are coming.

The figures are correct, I swear!
Congress now is calling for executives to certify the accuracy of their company's financial results and other data produced for regulators. Note the word certify. Fines and criminal penalties are included for any false statements, lies, or other falsification of figures submitted to the government. The new rules requiring such action also extend to those who destroy evidence or defraud investors. Pity the poor corporate officer who backs off or lacks the backbone to certify his own company numbers. The start date for this procedure was August 14 and some company execs in an attempt to show good faith complied early, so the papers said. Pepsi Co., FedEx, AMR Corp., and a few others swore to the accuracy of their figures.

As a practical matter, CEOs already face criminal liability for filing false statements with the SEC (18 U.S. Code 1001). Furthermore, a lot of the burden will fall on senior management and those who report to CEOs. But in their zeal to impress the public, regulators have to publish new rules and laws in their usual knee jerk reaction to perceived flaws in the system. Those in the know see this as nothing more than a reenactment of the current law with added fanfare on the part of the Congress. It won't help the cheated investors get any money back.

If executives lie they are now supposed to go to jail. We'll see.

Technicians' liability
By way of comparison, it is interesting to note that technicians have been under this gun for some time. They have been fined, gone to jail, or lost their livelihood by revocation of their certificates. Falsifying or otherwise "cooking" aircraft records and other submissions to the FAA has generally been the cause (FAR 43.12).

Again by comparison, the SEC will require company executives to merely state that . . . "to the best of my knowledge. . ." the report or filing statement did not contain . . . "an untrue statement of a material fact." As noted, the lawyers have provided plenty of wiggle room for the execs in the proposed statement. Compare this with . . . "I certify that this aircraft is airworthy . . ." The technician makes a clear and unambiguous statement. Too frequently it gets him into hot water. No wiggle room here!

What if technicians simply stated:
. . . "to the best of my knowledge . . . I certify that this aircraft record does not contain an untrue statement of a material fact or fails to include a material fact that would affect the airworthiness of the aircraft in a material way"
. . . or . . . "to the best of my knowledge I believe this aircraft is airworthy" . . . or . . ."to the best of my knowledge no material facts or actions by me affect the airworthiness of this aircraft."

No, you won't see this language and it is shown merely to make the point. No wiggle room? No chance of ever seeing this language. Technicians did not have lawyers pulling for them when their rules were written.

Fines and criminal penalties are all too familiar in our aircraft maintenance business. We all know that technicians are subject to severe penalties when they approve unairworthy aircraft for return to service. Why not the executives on top? (If there are any.) Falsification and fraud are commonly found in many business activities. Severe penalties are levied on technicians for such conduct . . . why not executives?

In the air carrier business there was a similar call for pressure on some executives to certify maintenance quality. Some airline accidents had some observers pressing for criminal charges against the executives involved. Personal certification by CEOs and other maintenance executives of aircraft airworthiness were proposed. Certification of the quality of major maintenance inspections and personally approving their accuracy was to be a major component.

Can the CEO or vice president of maintenance be made to certify airworthiness inspections on a personal basis without having actually worked on the aircraft or without being certified? I don't think so.

However, technicians expose themselves to the danger of criminal penalties and fines every time they sign their name on an inspection or work document in the hangar or in an aircraft logbook.

Snitch lawyers?
An obscure part of the new corporate reform bill approved recently in Congress requires lawyers employed by companies to report any evidence of fraud or other misconduct by corporate managers including their boss, to the board of directors. We have already seen where technicians have tried to report FAA violations by their companies and what happens to them! If a technician reports a violation or otherwise points the finger at management he can expect to be terminated or placed in a "safe" job. Even though there are many whistleblower statutes to protect him, his position will be precarious. I believe the same will apply to the lawyer for a company. Employment will be short lived.

One of the hallmarks of the legal profession has always been the so-called lawyer-client privilege. It simply means that anything told to the lawyer that you intend to be confidential must remain so. It is akin to the priest-penitent requirement of silence. Those in favor of this rule would say that it does not violate the privilege because the information is held within the company and the company is the real client.

Present rules of ethics give lawyers wide discretion in how to handle evidence of fraud that they find. Lawyers would be logically reluctant to blow the whistle and put their paycheck or fee in jeopardy. What we have here is an attempt at federal regulation of lawyers. Are not technicians responsible in a similar way?

Technicians' ethics
We have many times touched on this subject with regard to reporting violations seen at the company where you work. Many have asked this writer for advice on how to proceed. I have answered the questions this way: Any time you come across a serious violation of the FAR while on the job keep a personal written record of the same, noting the time, place, and any other detail of merit. Tell your immediate supervisor or the boss if he is the relevant person. Indicate in your log that you advised so and so of the defect. If the violation does not appear to be corrected you must advise top management by way of a letter stating the seriousness of the violation.

In most states whistleblower statutes make it unwise for the employer to take any action against you. There are also federal whistleblower statutes that may apply. The FAA need not be contacted until it appears that nothing is being done to correct the defect. Where there is imminent danger to lives then immediate action must be taken. Use the FAA hot line for quick action. Management also has self-disclosure procedures that allow contact with FAA and take remedial action.

So long as you have taken the necessary steps to correct any problems you can never be faulted. Keep a personal log of all aircraft that you work on. This can assist you if any retaliatory action is attempted. Be prepared!

Stephen P. Prentice is an attorney whose practice involves FAA-NTSB issues. He has an Airframe and Powerplant certificate and is an ATP rated pilot. He worked with Western Airlines and the Allison Division of GMC in Latin America, servicing commercial and military overhaul activities and is a USAF veteran.