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The Justice Department has reached a settlement with the company that had faked test results which caused faulty components to be installed on Orbital ATK’s Taurus rocket, eventually causing two consecutive launch failures.
SPI agreed to plead guilty to one count of mail fraud while SEI entered into a deferred prosecution agreement. SPI will pay $34.1 million in combined restitution to NASA, the Missile Defense Agency (MDA) and commercial customers, and forfeit $1.8 million in “ill-gotten gains.” The company will also pay an additional $6 million to NASA and $5 million to MDA as part of a separate civil settlement.
The companies acknowledged that SPI altered test results for nearly two decades, starting in the mid-1990s, such that aluminum extrusions that had failed mechanical properties testing instead appeared to have passed. Dennis Balius, a testing lab supervisor at SPI who led the effort to falsify test results for a number of years, pled guilty on separate charges in 2017 and was sentenced to three years in prison.
Those aluminum components were sold to a number of companies, including those who had contracts with NASA and MDA. The Justice Department statement noted that the components were used in frangible joints in launch vehicles and missiles. Such joints are used in vehicle separation systems.
“NASA maintains that SPI’s manufacturing processes lacked sufficient controls and produced extrusions unable to pass mechanical properties testing,” the Justice Department stated. “NASA further maintains that it identified SPI’s out-of-specification extrusions as the cause of two failed rocket launches, which resulted in the loss of important scientific missions.” SPI disputed those claims, although NASA has barred the company from contracting.
The worst part of this story is that it likely ended up destroying Orbital ATK, an innocent party to this fraud. Though the company lives on now as a division within Northrop Grumman, it never quite recovered from the two Taurus launch failures in 2009 and 2011. Customers went elsewhere, and the company’s launch business dried up. The only customer Orbital ATK was able to muster afterward was NASA, and the number of launches this provided was not enough, causing company’s eventual absorption by Northrop Grumman.