On April 1, 2002, at 0955 mountain standard time, a Rotorway Exec 165F helicopter, N21901, collided with the ground following a loss of tail rotor drive during a steep approach near Chandler, Arizona. The helicopter, owned and operated by Rotorway International under 14 CFR Part 91, was on a local area instructional flight. The helicopter sustained substantial damage. The commercial pilot/flight instructor sustained serious injuries, and an airline transport pilot student sustained minor injuries. Visual meteorological conditions prevailed and no flight plan was filed. The flight departed from Stellar Airpark, Chandler, about 0900. The CFI reported that after performing various maneuvers, he and the student began traffic patterns to a landing zone (LZ). On short final, approximately 40 feet, and 40 miles per hour (mph), the helicopter yawed left slowly. When the helicopter had reached a 45-degree left yaw, the CFI took the controls. As the helicopter approached a 90-degree left yaw, the CFI had applied full right pedal. Simultaneously, he lowered the collective and reduced power. The helicopter rotated 360 degrees about 3 times before impact. The helicopter impacted the ground, collapsing the right skid, and coming to rest on its right side. The helicopter was examined at Rotorway International in Chandler under the auspices of the Federal Aviation Administration (FAA) inspector. He reported that the tail rotor drive system uses three belts, interconnected via pulleys at various points within the tail boom, to drive the tail rotor. The forward and aft belts and pulleys were normal. The intermediate belt was found shredded, burned, and separated. The aft end of the intermediate belt was positioned correctly on the rear pulley; however, the forward end was around the wrong pulley, the one meant for the forward belt, which induced a large misalignment of the belt and consequent rub between it and the pulley side. All pulleys were installed with specified tightness and with fore/aft play as stated in the maintenance manual. The engine, clutch, drive belt system, and transmission were found in working order. Maintenance records for the helicopter indicated that the belts were replaced twice in the past 8 months. The first time was in August 2001, for a heavy maintenance rebuild. The second time was in November 2001 following a tail rotor strike. The belts had about 200 hours operating time since their last replacement in November. On April 4, 2002, Rotorway International issued a Mandatory Compliance Bulletin M-20 that required immediate inspection to verify proper routing of tail rotor drive belts through the tail boom. Any belt not properly routed into the correct idler pulley groove required immediate replacement.