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Texas Defense Contractor Charged With Using Substandard Parts on Military Vehicles

A longtime Fort Worth defense contractor named Ross Hyde has been charged in federal court with making false claims about the type of aluminum he provided under a contract for aircraft landing gear, court records show. He faces up to five years in prison, if convicted.

In court documents, Hyde, a machinist, has stated that he’s worked in the industry all his life. His latest company, Vista Machining Co., has supplied the Pentagon with parts since 2008.  The parts supplied were mostly hardware and machined metals used in tanks, aircraft and other military equipment. However, government inspectors said many of the parts he provided were cheap replacements, with some illegally obtained from China, which he tried to hide from the government.

Use of Substandard Parts is All Too Common

Contractors substituting cheap knockoffs, including some from foreign companies, is actually a common scam that is pulled by many less-than-scrupulous contractors. Unfortunately, the practice can lead to serious safety problems for service members, especially if the knockoff parts are used in critical systems. Despite the considerable danger, it’s a consistent problem, based on a recent survey of Justice Department announcements of indictments and news releases over the years.

Based on public records, Hyde is a second-generation defense contractor who has been facing financial troubles in recent years, based on bankruptcy filings and an IRS lawsuit for unpaid taxes. This, despite the fact that Vista Engineering has earned more than $20 million from government contracts, according to a government database.

Many have pointed out that cases like this one highlight the government’s seeming inability to provide proper oversight of its defense contractors, including repeat offenders who are able to keep selling t important government agencies.

Enforcing Rules on Contractors Seems Difficult

According to the Project on Government Oversight, a nonpartisan watchdog that keeps a database of federal contractor misconduct, all contractors cut corners at one time or another, but the real dilemma faced by the federal government is what should happen when they get caught. They note that, at some point, the government has to decide whether a contractor like Hyde is a responsible contractor, or if they are too risky to deal with.

Previously, in 1997, Hyde pleaded guilty to a charge of false statements by a government contractor. He was sentenced to one year in prison and a $60,000 fine. Ordnance Parts Inc., a company owned by Hyde and his father, also was charged in the case. Details of the allegations, in that case, are unavailable due to its age. Hyde was barred from working as a government contractor for three years as a result.

What Happened This Time Might Mean the End

In the latest case, according to Hyde’s charging documents, in January of 2015, prosecutors allege Hyde billed the government $12,897 in a single transaction for a part to be used for aircraft landing equipment, that he falsely claimed used a superior type of aluminum, when in fact he actually substituted a weaker and less expensive type of the metal.

The Defense Logistics Agency investigated Hyde and ultimately excluded Vista,  and determined that he and his company “willfully” violated federal rules and law multiple times in filling orders. According to the agency’s report, in addition to wasting money, Vista’s behavior “forced the government to purge unreliable Vista parts from its inventory before they are inadvertently installed on weapon systems that take U.S. service members into harm’s way.”

The report also noted that Vista also used vendors who were not authorized to receive “technical data that discloses critical technology with military and space application.” The Fort Worth company had obtained quotes from approved vendors but instead chose low-bidders from Chinese companies, the agency said. In one case, Vista paid another company to “grind off” a marking indicating the part was made in China.

Hyde and Vista’s work started to receive low marks for quality in 2015, and the government began rejecting his parts. The Defense Logistics Agency claimed that Hyde and Vista “displayed an inability or unwillingness to rectify these deficiencies.” As a result, the company could not maintain an adequate quality control system, which means use of their parts could injure military personnel or put a military mission in jeopardy.

The agency also claimed Vista had knowingly violated the Buy American Act, which requires federal agencies to purchase American-made products whenever possible.

In a 2014 interview, Hyde said that 90% of Vista’s business was supplying parts for U.S. military ground vehicles, including the Bradley tank, the M1 tank and an armored personnel carrier. He told the paper he envisioned his parts getting to the troops, saying, “I take a patriotic pride in this business. We’re making parts for our national defense. It gives you a sense of pride.”

According to Hyde’s 2018 lawsuit against the federal government, Hyde claimed that, without the ability to complete defense contracts, Hyde and Vista say they will be “forced to immediately shutter the business and face unemployment and financial ruin,” Vista said in a 2018 lawsuit against the government.

Posted in: Commercial Litigation

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