Everett defense contractor’s ex-vice president sues for discrimination

EVERETT — The former vice president of finance for a Pentagon contractor in Everett alleges the company engaged in widespread financial fraud and gender discrimination, according to a lawsuit filed this month in federal court in Seattle.

The complaint alleges TransDigm and AvtechTyee fired Phyllis Sullivan, 55, in retaliation for revealing the company’s fraudulent financial evaluations.

“The purpose of the lawsuit is to get (AvtechTyee) to do the right thing, to keep them from making these illegal transactions,” Sullivan said this month in an interview with The Daily Herald. “I want people to speak up without fearing retaliation.”

TransDigm and its subsidiary AvtechTyee are two of the largest suppliers of airplane components and systems to the Department of Defense. AvtechTyee’s headquarters are located at 6500 Merrill Creek Parkway in southwest Everett.

In 2018, AvtechTyee hired Sullivan as vice president of finance. Her job consisted of monitoring the company’s accounting practices and its compliance with “Generally Accepted Accounting Principles” — which ensure the accuracy of a company’s financial reporting, according to the complaint.

From the day she was hired, Sullivan had to fix millions of dollars worth of accounting errors, she said.

Throughout her three-year tenure, Sullivan observed AvtechTyee and TransDigm repeatedly inflating revenue reports and ignoring safety objections, the complaint alleges.

“At the beginning I thought it was just bad accounting by my predecessor or a bad process, so I would fix the accounting,” Sullivan said. “I finally realized that it was being done willfully and purposefully.”

In December 2019, an unfinished airplane component was shipped to arms manufacturer Lockheed Martin, she said. The part was returned by the contractor in March 2020, and Sullivan questioned vice president of engineering Victor Mesny why they delivered an incomplete part.

Mesny said he had informed his supervisor, vice president of sales Kevin Hanson, not to ship the part because it wasn’t ready, but that warning was ignored.

In other instances, the company falsely claimed hundreds of thousands of dollars in revenue from a nonexistent Boeing project and intentionally misstated revenue reports to “enhance AvtechTyee’s bottom line,” according to the lawsuit.

Sullivan concluded the supplier was fraudulently manipulating revenue at the end of fiscal quarters to inflate its share price and achieve bonuses for company executives, court documents said.

AvtechTyee headquarters on Feb. 10, in Everett. (Ryan Berry / The Herald)

In November 2020, Sullivan reported the financial irregularities to her supervisor, AvtechTyee President Dave Bender. In response, Bender ordered Sullivan to not speak about any financial misconduct, according to court papers.

Weeks after her initial fraud report, Sullivan reportedly received her first negative review by her employers.

The complaint alleges the review used discriminatory buzzwords, stating “she can come across as aggressive,” and needs “more tact” when collaborating with others.

After November 2020, Bender began to verbally criticize her, calling her “too emotional” whenever she raised concerns, according to court documents.

During one meeting with all of the company executives, Bender allegedly made racist jokes about Mexicans, even though he knew Sullivan was Mexican American. While she was present, he called Mexico the “dark basement” of the United States, Sullivan said.

In May 2021, she was fired, according to the complaint.

AvtechTyee declined to comment on the allegations.

This isn’t the first time the Pentagon contractor has been accused of excess profiteering.

In a 2021 audit reviewing 2½ years of TransDigm’s business dealings, the U.S. Department of Defense found the company overcharged the government up to 3,850% for a spare part in one weapons system.

The Pentagon estimated the total losses at $20.8 million and joined federal lawmakers in asking for a voluntary refund. The contractor contested the refund, citing flaws in the methodology for calculating excess profits.