The Department of Transportation’s Inspector General’s Office has launched an investigation into charges of fraudulent financial reporting by Boston-Maine Airways, the Portsmouth, N.H.-based airline that flies regional routes with 13 Jetstream 31s as Pan Am Clipper Connection.

Boston-Maine’s parent company, Guilford Transportation, filed for certification to expand its Boeing 727 fleet from three to seven airplanes, but the company has admitted in legal briefs that its former legal counsel, John Nadolny, changed figures in bank statements submitted to the DOT as proof of Boston-Maine’s financial condition. The probe aims to determine whether airline officials knew of or participated in Nadolny’s alleged fraud or any other improprieties. Nadolny resigned on June 3 after he allegedly produced a fake surety bond meant to guarantee a $320,000 settlement won by 48 former pilots in a lawsuit over the company’s failure to notify them of a planned layoff.

In November Pan Am ceased scheduled operations after a district judge issued an injunction barring Guilford from moving Pan Am’s 727s and ALPA-represented pilots to Boston-Maine, a non-unionized airline. However, when ALPA sought a contempt order against Guilford after it offered 727 charter flights on Boston-Maine’s certificate, the magistrate denied the motion, finding that the district court’s injunction did not bar Boston-Maine from developing its large-aircraft business independent of Pan Am. Last month BMA said it would suspend all 727 service from September 6 to November 7, citing weak bookings.

ALPA has called for the DOT to revoke Boston-Maine’s operating certificate. The union claims that the company repeatedly transferred work from unionized to non-union groups to avoid Railway Labor Act obligations, fired pilots because they refused to fly in violation of FAA rules, refused to comply with decisions of system boards of adjustment and willfully violated environmental laws.