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Suspect foreign helicopter firms still on Pentagon payroll

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By Reuters
Tuesday, Dec. 10, 2013, 9:42 p.m.

WASHINGTON — After almost four years of allegations that two related helicopter companies in Lithuania and Russia were doing substandard work and should be banned from contracts, the Pentagon continued to give them business, according to interviews and documents seen by Reuters.

As recently as last month, an Army planning document shows, the service was weighing contracting helicopter overhauls from the companies, which have been the subject of multiple internal warnings and two Defense Department Inspector General reports.

A Pentagon spokeswoman said no work was under way on the project, which is under review.

The Pentagon has been working with Lithuanian company Aviabaltika and a sister Russian firm, the St. Petersburg Aircraft Repair Co., or SPARC, for more than a decade to buy spare parts and overhaul Russian Mi-17 helicopters.

Pentagon officials say the Mi-17 is crucial to the ability of the Afghanistan military to conduct counter-terrorism and anti-narcotics missions as U.S. troops leave, because local pilots have a long history with the rugged aircraft. They have been supplied to allies Pakistan and Iraq.

Criticism of the two companies, which are run by the same person and described as a single entity, AVB/SPARC, in Pentagon documents, grew in recent months while the Army continues a review of allegations of overcharging, blocked access to outside quality inspectors and improper advance payments.

That review has lasted more than 14 months. Whether the Pentagon ultimately will continue working with AVB/SPARC remains far from clear given the controversies surrounding the companies.

The scrutiny of AVB/SPARC arises amid a broader backlash against the Army's more than $1 billion Mi-17 program. Congressional and human-rights critics say the program has put the Pentagon in bed with questionable business partners, and they are pressuring the Obama administration to wind it down.

Reuters in August reported that the Pentagon's Defense Criminal Investigative Service was probing an Army aviation unit that oversees the Mi-17 program; ties between Army officials and AVB/SPARC; and potentially improper payments to the firms.

That probe followed a September 2012 audit by the Pentagon's inspector general that found “indications of criminal activity” in one AVB/SPARC project. The report did not elaborate further.

The report added that AVB/SPARC failed to identify improper parts, and took 12-20 months longer than planned to overhaul some helicopters, costing the government $16.4 million. It recommended that the Army consider barring the firms from further contracting.

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