SpaceX caught another alleged space supply chain fraudster

The Falcon 9 launches NASA’s TESS satellite in 2018.
The Falcon 9 launches NASA’s TESS satellite in 2018.
Image: SpaceX
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A New York man has been charged with falsifying inspections of critical parts used in rockets built by SpaceX.

It’s no small matter: Last month, NASA pinned the loss of two rockets and their satellite payloads, worth $700 million, on falsely certified parts. In 2015, a SpaceX rocket was destroyed in flight after a weak strut broke apart under stress, costing NASA a cargo to the International Space Station and SpaceX hundreds of millions of dollars in lost revenue.

James Smalley, an engineer at a New York company called PMI Industries, faces criminal charges that could lead to up to 10 years in prison and a $250,000 fine. He declined to comment on the case through his attorney. SpaceX also declined to comment on the charges.

PMI was paid approximately $200,000 a month to manufacture aluminum and steel parts for Elon Musk’s Falcon 9 and Falcon Heavy rockets, including parts for the nosecone or faring that protects the satellite during flight. After SpaceX cancelled its contract, the company went out of business.

“Such fraudulent conduct jeopardizes no only the success of the program but the lives of the brave men and women who rely on the integrity of not just the space vehicles themselves but all those who help to design and build them,” federal prosecutor James Kennedy said in announcing the charges.

The problem was discovered when SpaceX had a quality assurance subcontractor audit its supply chain.

That subcontractor, SQA, found that the signature of one of its inspectors had been photocopied and pasted onto documents that approved parts for SpaceX’s rockets. According to the Department of Justice (DOJ), its investigation found that Smalley had falsified at least 38 inspection reports, and that 76 parts that were rejected or not inspected at all were still sent to SpaceX.

At least 10 missions, including two for the US Air Force, were “affected by parts purchased by SpaceX from PMI,” the DOJ noted in a press release. It’s not clear if the parts flew on all those rockets or were removed before flight. SpaceX discovered the fraud in January 2018, during preparations for the launch of a NASA satellite setting out to hunt for alien planets.

SpaceX referred the issue to NASA, and soon an alphabet soup of federal agencies, including NASA’s Inspector General, the Air Force Office of Special Investigations, and the FBI, were investigating the fraud, with charges brought on May 22, 2019.