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Concerns about DesignLine parts go back years

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ROBERT LAHSER - ROBERT LAHSER - rlahser@charlott

DesignLine, the bankrupt Charlotte-based bus-maker, faced questions about the installation of used parts in new buses as early as 2011, the Observer has learned.

The Observer reported last week that the FBI is investigating DesignLine over allegations related to used parts. Charlotte Douglas International Airport, which has 10 DesignLine buses, and a Denver transit agency that also uses the company’s buses told the Observer Friday that they had been contacted by the FBI.

Scott Mintier, who was president of DesignLine USA from 2010 to 2011, said an FBI agent flew from Charlotte to Albany, N.Y., this summer to interview him as part of the agency’s investigation. The agent focused on an allegation by a former finance official that the company had placed used parts on some of its new buses, Mintier said, but the former president said he knew of no violations.

“From my point of view, there’s nothing there,” said Mintier, a longtime industry veteran who is now retired.

The status of the FBI investigation is unclear, and it’s not known if the company or any employees will face charges. Municipalities often use federal grants to help buy buses, and bus manufacturers can be subject to federal purchasing regulations. It could be considered fraud if a used part was represented as new. An FBI spokeswoman declined comment.

Former Charlotte Mayor Anthony Foxx was an in-house lawyer at DesignLine from late 2009 until he became U.S. transportation secretary in July. A source familiar with the matter said the investigation dates to at least the fall of 2012, which raises questions about whether the matter came up during Foxx’s confirmation process this spring.

A spokeswoman for the U.S. Transportation Department said she could not comment on FBI investigations, and a White House spokesman said “all of our nominees are thoroughly vetted.” There is no indication that Foxx was involved in any wrongdoing.

DesignLine was founded in New Zealand in 1985. Retired Air Force Gen. Buster Glosson and his son, Brad, plus other partners, bought the company in 2006 and moved it to Charlotte. A number of well-known local residents were among its investors.

The company named a new CEO in 2012, former New York City transit official Joseph Smith, but DesignLine ran out of money in July 2013 when a potential investor pulled out. The company, which employed as many as 300 at its peak, filed for Chapter 11 bankruptcy protection in August and laid off most of its workers. A California-based investment group has bought the company’s assets and has said it plans to reopen.

From a factory off Westinghouse Boulevard, DesignLine used hybrid technologies to make buses that used less fuel and were cleaner for the environment. The company landed contracts with transit systems in Baltimore, Denver and New Jersey, but it also faced lawsuits and contract cancellations over late deliveries and, in some instances, questions about whether the buses were powerful enough.

Mintier, who ran operations under former CEO Brad Glosson, said he was aware of the finance official’s concerns about used parts when he was at the company, but it was “much ado about nothing.” It was a common practice to replace a part that was not working with another part off the shelf before a bus was completed, he said.

A part shouldn’t be considered used if it was never sold to anybody else, he said. But it would be a problem if a part was placed on a bus and it had previously been on another vehicle that had been sold, leased or rented – unless the subsequent customer had been notified, he said.

Typically in those cases, the customer might refuse the used part or ask for an additional warranty or some other concession, Mintier said.

Denver incident

A source familiar with the matter said the issue of used parts on DesignLine buses also came up in 2012. A vendor that made parts for DesignLine discovered that a turbine on a Denver Regional Transportation District bus had been previously used on another bus, the source said.

Smith, DesignLine’s chief executive at the time, “was phenomenally upset about something like that,” the source said. “Joe stepped up and made it right.”

Scott Reed, a spokesman for Denver RTD, confirmed that the agency learned from DesignLine that the first of its two buses had a used turbine. “We were unaware that was the case and DesignLine contacted us to alert us to the issue,” Reed said. “The turbine was quickly replaced by DesignLine at their cost.”

Denver RTD was contacted by the FBI in September 2013 and there was a telephone conference call, Reed said. The agency has had no further contact with the FBI since then.

Denver has been pleased with the operation of its two buses, Reed said. Neither the turbine vendor, California-based Capstone Turbine, nor Smith could be reached for comment.

Capstone continued working with DesignLine after the Denver incident, announcing in April 2013 that it had received an order for turbines to be used in 34 DesignLine buses. The buses were to be delivered to the Denver RTD later this year, but those plans are in a “holding pattern” because of the bankruptcy, Reed said.

Among DesignLine’s customers, Charlotte Douglas International Airport has 10 buses that shuttle passengers between parking lots and terminals.

The FBI interviewed Jerry Orr, the airport’s former aviation director, this summer as part of its investigation, airport officials said. Orr is currently the executive director of an airport commission that is in legal limbo. The airport has no way of knowing if parts on its buses are new or used, the officials said.

Foxx’s role

Foxx started doing legal work for DesignLine in March 2009, when he was an attorney with Hunton & Williams. In December 2009, Foxx told the Observer the bus-maker asked him to become its attorney, and that he had been careful about any conflicts between his public office and private job.

Foxx, who made $88,000 a year, worked on contracts and bids, but wasn’t involved in the financial side of the company, Smith has told the Observer. The Obama administration nominated Foxx in April as transportation secretary, and the Senate confirmed him in June by a 100-0 vote.

When asked by a McClatchy Washington bureau reporter this week, Sen. Jay Rockefeller, D-W.V., the chairman of the Senate Commerce, Science and Transportation Committee that held hearings on the nomination, said he did not know about the investigation at DesignLine. Ranking member John Thune, R-S.D., said the committee reviewed “what was publicly available” on Foxx.

Chris Swecker, a former top FBI official, said he would be “astounded” if FBI agents vetting a Cabinet nominee weren’t aware of any investigations related to a candidate.

“The FBI conducts the most thorough background check there is,” Swecker said, emphasizing that he was speaking generally about background checks and was not familiar with the DesignLine investigation or Foxx’s background check. “They are the gold standard.”

McClatchy Washington bureau reporters Curtis Tate, Anita Kumar and Greg Gordon contributed.

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