Eastern Air Lines said yesterday it expects to be indicted on a charge of criminal conspiracy to falsify safety maintenance records -- a move that would make it the first U.S. airline ever to have such a charge brought against it.
Martin R. Shugrue, Eastern's bankruptcy court-appointed trustee, made the announcement at a press conference called hastily yesterday after attempts to reach a plea agreement with the U.S. Attorney's office in Brooklyn broke off Monday night.
At least three former or current Eastern officials have agreed to plead guilty to grand jury charges, sources said yesterday. The U.S. Attorney's office also is expected to bring charges against other past or current company officials, although there was no indication how high up the management ladder the indictments would reach.
The U.S. Attorney's office declined to comment on the charges. But Shugrue, in an attempt to minimize potential damage from the investigation, went public yesterday with some details of the anticipated charges.
"Today or tomorrow the federal grand jury convened in the Eastern District of New York will indict Eastern and certain management employees with multiple counts of violations of the law with respect to our maintenance program," Shugrue said. He also indicated that the investigation, which has been focusing on the airline's New York operations, may have expanded to the carrier's operations elsewhere.
One of the charges known to have been investigated was an allegation by a former Eastern manager at New York's LaGuardia Airport that mechanics routinely falsified records to show that they had tested fuel tanks for water accumulation in aircraft parked overnight, although the tests were never made. Excessive water in the fuel tank could cause an engine to stall.
Shugrue said that the airline was willing to admit to maintenance violations that had occurred in the past and assured that the airline had taken steps to correct them. But he said he balked at pleading guilty to an airline-wide conspiracy to falsify records, saying that he hadn't seen any evidence to support the charge. In addition, he said, he refused to agree to a plea naming individuals who have denied wrongdoing.
Doing so would have put him in the "unethical role of being the judge, jury and executioner," said Shugrue, who has been trying to rebuild the airline since it filed for reorganization under bankruptcy laws last year. "I will not do that."
Shugrue emphasized that the violations in question date back to before the strike at Eastern began on March 4, 1989, and well before he and a team of new managers came in to take control of the carrier. Eastern filed for reorganization in federal bankruptcy after the strike began.
Last year, at the insistence of the federal bankruptcy court, the Federal Aviation Administration conducted a major inspection of all Eastern's facilities and gave the airline a clean bill of health.
But airline industry analysts said that the indictment would still hurt the airline, which has been struggling to win back customers. The blow may increase pressure on Eastern to liquidate, said one analyst, who asked not to be named. On top of everything else, Eastern has had to fend off damage from repeated reports that it might be liquidated -- since many travelers are reluctant to buy tickets on an airline that might not be around when they're making their trip.
"I do not intend to liquidate this company. Period. Paragraph. Chapter. Verse," Shugrue said yesterday.
Eastern's attorneys had met with U.S. Attorney Andrew K. Maloney of the Eastern District of New York in Brooklyn in hopes of reaching a deal that would have written a faster end to the anticipated indictments than a trial.
The nearly year-long grand jury investigation grew out of a pre-strike FAA investigation that resulted in an $839,000 fine against Eastern for maintenance violations, primarily at John F. Kennedy International Airport in New York, but also at LaGuardia. Eastern subsequently surrendered its maintenance license at Kennedy and shut down its major maintenance facility there.
The FAA charged the airline with falsifying its records to indicate that maintenance had been performed when it had not. The charges came at a time when Eastern's unions were mounting a major publicity campaign raising questions about safety at the airline.
Eastern's unions, fervent critics of Eastern management in the past, were muted in their reaction to Shugrue's announcement. One top union leader said he did not want to comment for the record because of negotiations between the union and Shugrue over the possible sale of Eastern assets to Northwest Airlines.
Alan Boyd, chairman of Airbus Industrie of North America and head of the committee of Eastern's unsecured creditors, said that the group supported Shugrue's decision to reject the plea bargain.