From Gary Stoller's USA Today article:

A special FAA review team formed after the crash said the use of Form 337 did not violate FAA regulations, but an FAA advisory explicitly says the form cannot be used for foreign-registered jets, as Swissair's were. Form 337 is only authorized for use on U.S.-registered aircraft and is usually used for major repairs -- not for major aircraft modifications.

A month after SBA began certifying the entertainment systems on Swissair jets, the FAA's Western Pacific region office finally acted on its Van Nuys inspectors' findings and ongoing concerns about SBA. The office suspended SBA's operating certificate, according to FAA documents.

The suspension should have halted SBA's operations, but the company continued to work on the Swissair project. On Dec. 16, 1996, four days after SBA's operating certificate was suspended, an SBA official wrote a letter to Hollingsead's quality-assurance director and authorized him to sign an FAA form stating that part of the project met federal regulations.

The following day, the FAA's regional legal office abruptly reversed itself, saying it had suspended SBA ''by mistake'' and restored its certificate, according to a Dec. 31 letter. FAA attorney Sam Frazer, who signed the letter, said the case against SBA was dropped because the inspector involved in the case had retired.

Keith Thompson, the now-retired inspector, says the case should not have been dropped because he left. A suspension of an operating certificate and an immediate reversal is suspicious, he says, but he doesn't know why the FAA legal office acted as it did.

http://www.usatoday.com/money/biztravel/2003-02-16-swissair-investigation_x.htm

This also needs to be looked into:

In August 1994, IFT approached Edward Mlynarczyk, a private engineering representative designated to act on the FAA's behalf, to certify components and help bring the overall system to the FAA for a required supplemental type certificate (STC). An STC represents FAA approval for modifying an airplane from its original design and is granted after a rigorous process of sign-offs on design data, components and test results. An STC can be obtained from the FAA or from one of about 30 certified aviation repair shops.



Mlynarczyk is one of thousands of designees used by the FAA to help certify aircraft modifications. Under a decades-old program almost unknown to the public, the agency allows designees to be paid by the companies contracting them for certification work.

Mlynarczyk says IFT's system was very rudimentary and unsuitable for aircraft use, but the company pressured him to accelerate the certification process. He says much work was needed before the equipment could pass FAA tests, including environmental and electromagnetic interference tests.

"They had no clue what it would take to get an STC," says Mlynarczyk. "They would send some information about the system, and when we'd say, 'That's not good enough,' they'd say, 'You're trying to gouge us for more money.' They were running out of funds and trying to shortcut so many things."

Mlynarczyk says he received a phone call from a representative of stockbroker D.H. Blair & Co., who asked him whether certification was near and whether he'd like to get in on the ground floor of IFT's initial public stock offering. IFT went public in March 1995.

Such an offer could violate a federal bribery law, which applies to anyone, like Mlynarczyk, acting on behalf of the government. The law, which imposes a fine and up to 15 years imprisonment, is violated by offers of "anything of value to any public official" with intent "to influence any official act."

Mlynarczyk says he turned the offer down. Several years later, D.H. Blair and 13 former employees were found guilty of defrauding investors in 15 IPOs � including IFT's � through stock-price manipulation. Four of those employees � including the vice chairman � received prison sentences. The company is now defunct.

A month after the stock offering, Mlynarczyk says he canceled his contract with IFT because the company kept changing its entertainment system specifications and pressuring him to speed up the certification process. Two days later, while he was away, two men arrived at his Florida office in a limousine with New York state license plates and demanded that his wife hand over the prototype and related data, Mlynarczyk says.

His wife refused their demands because IFT still owed $30,000. The two men handed over $30,000 in cash and then cut the prototype system into parts when it didn't fit into the limo, Mlynarczyk says.