Exclusive: How a Chinese Firm Conned a MAJOR US Defense Contractor

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A Whistleblower caught a Chinese Aerospace manufacturing company running a massive con-scheme to defraud major U.S. Defense contractor Boeing into paying full price with taxpayer money for dangerously sub-standard parts. Charles Shi, pictured above, was quickly fired for it. The diligent aerospace quality control manager got some great news on Friday. A decision announced late the day before, by Judge Lawrence J. Vilardo of the U.S. District Court for the Western District of New York, continues to vindicate everything Shi has been saying all along. According to court documents, “The United States government was paying for airplanes that, because of Defendant’s intentional and/or reckless conduct, were at risk for possible catastrophic failures due to fraudulent and illegal manufacturing processes.” The judge declared that the “former supply chain manager residing in China adequately alleged that Moog Inc. violated the False Claims Act by firing him in retaliation for calling attention to what he believed was an improper airplane parts manufacturing process.” It was wonderful news, just when the informer needed it the most. While America is hailing him as a hero, his home country is ready to have him disappeared, or worse.

UPDATE: This article was written based on information available at the time. Since publication, more detail clarified that the latest ruling is not a final determination of the case on it’s merits, rather a ruling on a second motion to dismiss which confirms the first ruling in it’s entirety. The case will now proceed to trial on the issue of Mr. Shi’s unjust termination in retaliation for being a whistleblower. The text has been modified to reflect the new information.

Just doing his job

Back in June of 2015, according to U.S. Federal court records filed in the case of Shi v. Moog Inc., plaintiff Charles Shi – who lives in Shanghai, China – noticed that his employer, Moog Control System, “was buying parts for United States military airplanes from a Chinese supplier that was cutting corners and hiding the fraud with false documentation.” That isn’t good. “Plaintiff became concerned that the defective parts could have catastrophic consequences for anyone operating the airplanes after they were delivered to the United States Department of Defense.”

“Catastrophic consequences” means a plane crash and the Pentagon isn’t the only one who should be worried because the planes being delivered to the DOD were Boeing 737’s virtually identical to the ones used commercially around the world. The same “half-baked” bogus Chinese parts that the taxpayers got cheated into paying full price for went into every 737 in service today. They’re still there too.

Mr. Shi did the right thing. He went straight to his boss. “Plaintiff raised his concerns with his immediate supervisor and was ignored.” Plaintiff went up the Chinese corporate ladder and raised his concerns with officials at Moog Shanghai’s American parent company, Moog Inc. in Elma, New York. They checked into it, determined he was right, and tried to sweep it under the rug. “An internal investigation ensued that at least partially substantiated plaintiff’s concerns but downplayed any impact on safety.” The day after he sent an email to the company’s CEO he was fired. That’s illegal. Specifically, a violation of the “False Claims Act.”

Mr. Shi lawyered up and filed suit in U.S. Federal District Court. The Chinese Defendants immediately tried to have it thrown out of court but Mr. Shi’s attorneys hung tough, and the court agreed wholeheartedly that Mr. Shi at least had a case. Moog appealed that decision and a second judge took a totally fresh look at everything and confirmed what the first judge had to say. It’s taken another year but the case was not dismissed and can proceed to trial. Two judges now totally agree that Mr. Shi was fired simply “because he complained about defective parts making their way into airplanes built for the United States Department of Defense.” According to court documents, “The United States government was paying for airplanes that, because of Defendant’s intentional and/or reckless conduct, were at risk for possible catastrophic failures due to fraudulent and illegal manufacturing processes.”

Military version of Boeing 737

No good deed goes unpunished

The U.S. decision comes at a time when Mr. Shi needs it desperately. He filed criminal charges in China against his employers for their fraudulent schemes and was in return sued by the company who made the counterfeit parts, for defamation. Illegally, even under Chinese laws, the court turned over every scrap of evidence Mr. Shi had against New Hong Ji, the criminal defendant, to them so they could use it against Mr. Shi in their defamation case.

In July, Mr. Shi had a hearing, where as part of its decision, the court determined that all of Mr. Shi’s evidence was factually correct. That’s important because “Truth” is a defense to defamation. Despite the favorable way the hearing went, the final decision was shocking. The Chinese “kangaroo court” totally ignored valid evidence to reach it’s final decision. The Suzhou judicial system “connived to silence me, the lawful whistleblower.”

“I need to pay NHJ RMB10K,” Mr. Shi writes. That isn’t quite as bad as it sounds. 10,000 Renminbi is around $1,465.46 in U.S. dollars. It’s also a whole lot better than what they were asking for. “NHJ originally wanted RMB500k,” which works out to $73,273.00 “for speaking to foreign media, (including yours truly,) and writing blogs exposing NHJ counterfeiting.” Along with the fine, he must make an “apology in a Suzhou local newspaper.” If he doesn’t formally apologize at his own expense, the Chinese “primary court will publish the verdict and I have to pay for publishing the verdict.”

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An Air India Express Boeing 737 overshot the table-top runway.

Single point of failure

Mr. Shi continues to resist that verdict. He’s also complaining in such a way as to put pressure on the local Chinese Communist Party directly. They don’t seem to be following their own laws which would appear to make them “lose face.” It’s important to note that the National CCP is probably unaware of what the local officials are up to. Mr. Shi makes it clear that his big concern is specifically with the Suzhou Procuratorate (Prosecutor General’s Office) who “knowingly but wrongfully” defined the NHJ counterfeiting case “as a state secret, and knowingly excluded the NHJ key criminal evidences as they could not answer how 112 pieces of aviation material became 612 pieces on NHJ production documents for a single point of failure part of B737 spoiler.” In aviation lingo, a “single point of failure part” is one that when it fails, people die.

In today’s news from Mumbai, India, a report announces that a crash report is expected in January for an “Air India Express Boeing 737 aircraft” which “overshot the table-top runway of Calicut airport and crashed, killing 18 people.” Those 18 people might be alive today if anyone bothered to listen to Mr. Shi. The Chinese bogus part that the whistleblower tracked all the way through the supply chain as evidence, is the exact one suspected to have failed in the Calicut crash. For some strange reason, today’s news story notes, despite the fact that a total of 193 countries, including India, “follow aircraft accident investigation norms,” and release a preliminary report within a month, this time, 50 days have gone by and they’re saying they won’t say anything until next year.

“In the meantime,” Mr. Shi writes, “I assume my fate is even more unpredictable and risky because I shall not keep my mouth shut until I am silenced physically or made disappeared.”

2 COMMENTS

  1. I admired Mr. Shi’s bravery, honesty, and desire to prevent future accidents. I hope our government get serious about giving outsourcing jobs overseas especially to China and other communist party. The company outsourcing manufacturing jobs overseas: The U.S. company outsourcing the the job must provide specifications how parts or any product to follow up to the minute detail, and then how it is supposed to be inspected for product distribution, packaging, etc. Product inspections is a must so that the product expected is perfect to market and safe guarantee. I disagree with our government and U.S. manufacturing companies on outsourcing of U.S. Manufactured products. First, we are giving up secrets in order to produce the product by giving detailed specifications for product manufacturing. second, U.S. A. population are denied such jobs. Thirdly, U.S. will be dependent on the country who got the job.

  2. China Suzhou CCP Supervision Commission has Done Nothing To Stop LEA And Judicial Corruption https://charlesshi.blogspot.com/2020/04/new-complaint-to-suzhou-ccp-supervision.html

    There is a genuine danger of life and freedom of this whistleblower mentioned in Mark’s article because of local CCP supervision commission knowingly did not act upon repeated complaints on the cover-up and mishandling by Chinese law enforcement agencies (LEA) and judicial organs. LEA connived with judicial organs to silence the whistleblower through a fake defamation law suit by the very counterfeiting suspect. More media voice is needed that may help the whistleblower to remain free and alive. Contact: charles Shi at [email protected]

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