NewsChannel 5 Investigates Cheap O-rings - | Nashville News, Weather & Sports

NewsChannel 5 Investigates Cheap O-rings

Charles Phillips Charles Phillips

If you pay extra for something you expect it to be higher quality. So why was Arnold Air Force Base in Tullahoma receiving cheap, Chinese-made parts when it paid for high quality American parts?

A Newschannel 5 Investigation reveals a scheme that the government claims could have led to catastrophic results.

Charles Phillips is the head of a company accused in court papers of ripping off taxpayers.

Investigators searched Signal Industrial Products on Omohundro Place claiming it charged the Air Force and TVA for high quality parts but delivered cheaper ones. 

Investigative Reporter Ben Hall asked, "Did you instruct employees to send inferior products to the government?"

Charles Phillips responded, "No.  But I cannot discuss it."

Signal had millions of dollars in government contracts to sell  basic manufacturing tools -- O-Rings and Gaskets. 

According to court documents Arnold Air Force Base ordered top of the line O-Rings, but Company President Charles Phillips told employees to send lower quality, generic O-Rings, made in China, instead.

Retired Major General Mike Wiedemer has seen product substitution cases in the past.

"It's not only ripping off the taxpayers, it has to with the safety and security of the system," said Wiedemer.

He says Arnold Air Force Base tests everything from fighter planes to the space shuttle.

"When you're putting aircraft back together, you want to put it together with parts that are going to work.  When this baby is flying in the air you don't need wings or skin panels falling off in the middle of flight.  That's not a good thing," he said.

The challenger disaster is just one past example of how critical a simple O-Ring can be. The investigation into the explosion focused on the failure of an O-Ring.

Mark Fournier sells O-Rings to the military, and is not associated with Signal.  He showed us several o-rings.

"It's used in everything.  They are all over the place," Fournier said.

He says the problem with O-rings is, you can't tell the difference between the generic brands and high quality ones.

"I couldn't, and I've been doing this sixteen years, not just by looking at it.  It would have to be tested and measured," Fournier said.

He says a company could increase profits by about thirty cents on every dollar by substituting cheaper brands.

"If you're talking thousands of them, obviously that adds up," Fournier said.

Court documents show when the Air Force became suspicious, it sent O-rings purchased from Signal to the US Army Criminal Laboratory for testing.

The analysis revealed "numerous differences" between high quality O-rings and the ones Arnold received.

Reporter Ben Hall asked Charles Phillips, "How do you explain tests by the government that indicate the government didn't get what it paid for?"

Phillips responded, "I have no idea." Ben Hall asked, "You can't explain those tests?"

Phillips said, "No.  I can't discuss it per my attorney.  I'm sorry."

But Signal's problems go beyond O-Rings. 

Court papers show Signal provided Gaskets to numerous TVA plants. 

Investigators reviewed Gaskets at TVA's Gallatin Steam Plant and several others and found numerous examples in which the gasket TVA ordered was different from what they received.

Phillips made it clear he can't talk about the case, but others in the industry know what's at stake.

"If there's a failure and somebody gets hurt, it's going to come back on me and there's going to be a lawsuit," Mark Fournier said.

Signal Industrial Products is facing more than a lawsuit.  It's at the center of a criminal investigation.

Reporter Ben Hall said to Charles Phillips, "We want to give you every chance to respond."

Phillips said, "In due time, I'm sure we will."

The company denies any wrong doing, but the allegations are all laid out in court documents that detail tests done on the products that Signal sold. 

It's still an ongoing investigation.

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