WELCOME AGAIN TO the lethal but profitable wonderworld of defense contracting—legendary birthplace of the $437 hammer and the $640 toilet seat. It’s where forgive and forget is seemingly written into the contractual fine print, where taxpayers at the mercy of major US arms-makers have to choose the corporations’ way or the highway, and where, unfortunately, there’s a new case in point:

Having just undertaken a $76 million US contract to modernize Chinook helicopters for the Army, the Boeing Co. is now facing the prospect of paying the US $90 million for earlier mistakes it made modernizing Chinook helicopters for the Army.

Boeing’s sworn assurances to the contrary, the company’s subcontractor produced faulty helicopter gears for at least five years, leading to two chopper crashes that might have been avoided, the US Department of Justice says. Boeing’s actions may even have been intentional and fraudulent, claims the government in a little-noticed case that has quietly grown four years old and may be nearing settlement in Ohio. Additionally, a civilian attorney suggests that similar mistakes by Boeing, which has been manufacturing combat-ready Chinooks for the Army since 1962, may be responsible for other, fatal, military chopper crashes—a charge Boeing unequivocally denies.

The claims are laid out in a David vs. Goliath lawsuit once sealed from the public, pitting a disgruntled Midwest engineer against America’s no. 2 defense contractor. The federal government has joined with the engineer in attempting to prove Boeing knew about faulty helicopter parts that may have led to the crashes in 1991 and 1993. Attorneys and court documents indicate that Boeing, Ohio whistleblower Brett Roby, and the US Department of Justice are now engaged in negotiations that could end the Chinook helicopter civil fraud case.

SEVERAL SOLDIERS WERE INJURED when two Chinooks crashed in Saudi Arabia and at Fort Meade, Maryland, due to cracked transmission gears crucial to spinning the choppers’ tandem rotors. The US and Roby contend that Boeing was aware of the flawed gears made by its subcontractor Speco Corp. of Springfield, Ohio, where Roby worked. Boeing, they claim, sold the choppers to the Army with the gears installed, but hushed up the imperfections by concealing documents and threatening Speco with retaliation if it didn’t keep quiet.

Boeing strenuously denies all the accusations, including Roby’s claim that a number of other Chinook crashes in past years were similarly caused by faulty parts. (Chinook crashes during the Gulf War and training exercises in Texas altogether left 15 soldiers and two Boeing engineers dead.) Boeing argues the fatal crashes of the last decade have no connection to the claims in Roby’s faulty-parts lawsuit. (The Army has 500 Chinooks, most are still flying, and not all have Speco gears, officials say.)

The Seattle aerospace giant also says there’s no evidence the company was aware beforehand of the faulty parts that government probers determined caused the 1991 and 1993 crashes. Choppers with Speco gears, according to court claims of Boeing attorneys (who would not respond directly for comment), have logged more than 350,000 flight hours without incident since 1993.

A quality control inspector for Speco, Roby quietly filed his lawsuit under the False Claims Act in May 1995, as a federal whistleblower claiming that Boeing cheated taxpayers (under US law, he can share in any settlement). His lawsuit was under seal until 1997, when the US joined the case and issued an amended complaint seeking $90 million from Boeing for allegedly selling the upgraded Chinook with full knowledge that some gears were cracked.

The case, beleaguered with legal slowdowns, has been progressing at a quickening pace recently. According to a review of Ohio court records last week, Boeing, Roby, and the US government have been ordered into nonbinding arbitration. If no settlement is reached soon, a predictably lengthy jury trial may begin later this year.

Federal prosecutors, in an original 40-page complaint and stacks of court filings since, call Boeing reckless for deliberately concealing reports of the flaws and for threatening to drop Speco as a subcontractor if it revealed the problem. Documents written in 1991 by Boeing officials overseeing gear production suggest Speco’s manufacturing and control systems were in disarray and that an “astounding” rate of one in every four gears were being scrapped. Yet, says the US, Boeing continued to buy the Speco gears and guarantee them to the Army through 1995.

In court, Boeing has denied any cover-up. (Speco went bankrupt and has already settled US claims that it made the faulty parts.) None of the parties last week would respond directly to questions regarding a possible settlement, but a spokesperson for Roby’s Cincinnati attorney, James Helme Jr., says of the three sides, “They’re talking—that’s all I know.”

EVEN IF BOEING LOSES or settles the fraud suit with the US, the corporation likely doesn’t have to worry about future government chopper contracts. Among the $10.9 billion in US arms sales Boeing earned last year, the Pentagon in May announced a new pact with Boeing for a chopper modernizing program similar to the one that led to the current court battle. This year and into the near future, the Department of Defense will pay Boeing at least $76 million to remanufacture 300 Chinooks currently in Army service.

The pact is another Pentagon thumbs-up for the company’s helicopter division, Boeing Rotorcraft, which has evolved into essentially a weapons-production unit and helped last year to prop up the company’s commercial-earnings slump. Boeing recently sold its light commercial helicopter division and is now concentrating on building and training personnel to fly military rotorcraft.

The division’s future is in great part pegged on the newest version of the Apache combat helicopter—the Longbow—which features advanced radar-controlled weaponry (although the model has already come under critics’ fire). The Pentagon plans to buy as many as 758 Apaches for $4.9 billion, but the General Accounting Office says the craft has several drawbacks including a major one for an attack chopper: It lacks “the agility to operate successfully in combat.” Nonetheless, Boeing and the Pentagon insist the Apache meets all requirements and that production is a go.