Manufacturer Fined $2 Million then Awarded New Military Contract
NY Times
Published: February 6, 2008

A North Dakota manufacturer has agreed to pay $2 million to settle a suit saying it had repeatedly shortchanged the armor in up to 2.2 million helmets for the military, including those for the first troops sent to Iraq and Afghanistan.

Twelve days before the settlement with the Justice Department was announced, the company, Sioux Manufacturing of Fort Totten, was given a new contract of up to $74 million to make more armor for helmets to replace the old ones, which were made from the late 1980s to last year.

Sioux upgraded its looms in 2006, company executives say, and the government says it has started inspections at the plant.

The United States attorney for North Dakota, Drew H. Wrigley, called the accord "an appropriate resolution" because the Defense Department had said that 200 sample helmets passed ballistic tests and that it "has no information of injuries or deaths due to inadequate Pasgt helmet protection."

Pasgt, pronounced "pass-get," stands for the Personal Armor System for Ground Troops, which includes the helmet model being replaced.

At the core of the investigation was the contention by two former plant managers that Kevlar woven at Sioux failed to meet the government's "critical" minimum standard of 35 by 35 threads a square inch.

When properly woven, Kevlar, a polymer thread made by Dupont, is stronger than steel, and able to deflect shrapnel and some bullets. Government regulations call for rejecting Kevlar below the 35-by-35 standard.

The company "was underweaving," Mr. Wrigley said.

"That is undebatable," he said.

The factory's own inspection records often showed weaves of 34 by 34 threads or as low as 32 by 34 and 33 by 34. Looms were "always set for 34 by 34, always," said Jeff Kenner, who operated and repaired the looms and oversaw crews on all three shifts.

In a statement, the company president, Carl R. McKay, denied "any and all of the allegations originally brought to the attention of the Department of Justice by disgruntled ex-employees."

Settling the case, United States v. Spirit Lake Tribe, filed in Federal District Court in Fargo, Mr. McKay said, was "a prudent business decision" to avoid legal costs and "should not be construed as an admission of wrongdoing."

The potential harm is difficult to judge. Helmet damage depends on the projectile. Whether a damaged helmet would hold up better with a tighter weave is hard to calculate, experts said.

"You must have a certain amount of protection, and you can't go below that," said Gwynedd A. Thomas, associate professor of ballistics and protective fabrics at Auburn University.

Although the difference between 34 and 35 threads a square inch seems modest, the cumulative loss in layers of fabric is significant, Dr. Thomas said.

"Every time that you're losing some mass, you're losing some integrity," she said.

The strength comes from crossed yarns, the points that disperse projectile impact. "The fewer crossovers, the less energy dissipation you're going to have," she added.

A 34-by-34 weave results in 5 percent fewer crossovers than 35 by 35, a difference Dr. Thomas called "quite a lot."

"I'm surprised somebody is not pursuing that more vigorously from the government," she added. Were she a soldier's parent, she said, "I would want to give my son a better helmet."

The $2 million settlement is far short of what the two former managers, Mr. Kenner and Tamra Elshaug, hoped for in 2006 when they filed a whistle-blower suit. The suit, for $159 million in damages, accused the company of defrauding the government and violating safety standards.

"I think they got away with it," said Mr. Kenner, who worked at Sioux for 20 years and was the weaving supervisor. "Sioux Manufacturing basically got a slap on the wrist," he said. "The Justice Department did a really good job, but the Department of Defense is really just downplaying this. They're embarrassed and want it to go away and would not admit to anybody's getting hurt or even killed."

Mr. Kenner and Ms. Elshaug's lawyer, Andrew J. Campanelli, challenged Defense Department contentions that it was unaware of injuries from defective helmets. "There are tons of injuries with shrapnel and bullets going through helmets," he said. "My clients documented that American soldiers did not get the protection that the government paid for, that the taxpayers paid for."

In the evidence in the suit were hundreds of daily inspection records showing repeated violations of the weaving standards, as well as tape recordings of six managers and employees' admitting covering up violations.

In a conversation Mr. Kenner secretly taped, Rhea Crane, quality assurance officer, worried "if we ever had someone get killed, and they decided to investigate because they thought maybe the helmet wasn't any good."

"If we ever got audited," she said, "you know what they would do to us. Shut us down and fine us big time. Probably never see another government contract."

Ms. Crane did not return repeated calls for comment.

Justice Department officials said some Sioux records listed looms with 35-by-35 counts, with a few at 36. Dr. Thomas agreed looms could be adjusted to do so.

Mr. Kenner and Ms. Elshaug, who worked at the plant for 26 years and was in charge of buying Kevlar, say thread counts were routinely rounded up to reach the 35-by-35 minimum.

The papers in the suit showed a Kevlar surplus of up to 30,000 pounds and a resin shortage. Extra resin was applied to the Kevlar to bring it up to a specified weight, the former employees said.

Extra resin also poses a hazard to soldiers, Dr. Thomas said, adding, "If they were putting more resin in, they were doing something that will hurt soldiers, because it reduces elasticity and increases brittleness."

Mr. Kenner said, according to the suit, that when he asked Mr. McKay about the violations, he responded: "That is the way we are going to weave it. Don't you worry about it."

Mr. McKay did not respond to e-mail and phone messages.

Despite excellent job ratings, Mr. Kenner and Ms. Elshaug were fired after protesting the violations. Mr. Campanelli will share part of the settlement totaling $406,350. There is no further legal recourse, he added.

Soldiers generally cannot sue the government. And Sioux is owned by an Indian tribe, the Spirit Lake Nation, that can, he said, assert sovereign immunity against private suits.

The company also benefits from a 5 percent federal incentive program for Indian contractors and preferences for disadvantaged small businesses.

Ms. Elshaug and Mr. Kenner said they did not regret suing. "It was never about the money," he said. "It was about the soldiers. I'm still shocked. I wouldn't be wearing one of those helmets."

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