RSCC Chief Financial Officer Dennis Pivnyuk said the new procedure will not necessarily move RSCC away from Russia’s principal commercial launcher, the heavy-lift Proton vehicle. Credit: International Launch Services

LONDON — Commercial space launch services provider International Launch Services (ILS) is alleging that its former chief technical officer set up shell companies that billed ILS for thousands of hours of work that he actually performed as an ILS employee.

Reston, Va.-based ILS is further alleging that the actions of the former employee, James M. Bonner, violated the U.S. Racketeer Influenced and Corrupt Organizations (RICO) Act, a federal law commonly used to prosecute organized crime.

In documents submitted to the U.S. District Court for the Eastern District of Virginia, ILS says Bonner, who was fired in August, conspired with a friend, Thomas J. Dwyer, to create two fictitious companies that billed ILS for safety-related analysis.

ILS is majority owned by Moscow-based Khrunichev Space Center, which is the principal builder of the Proton heavy-lift launch vehicle.

Lawyers for Bonner and Dwyer, along with their two affiliated companies, have asked the court to reject the idea that what they did rises to the level of a RICO charge, saying that ILS is attempting to portray a “garden variety” violation of fiduciary duty as a federal crime.

If the court rejects the RICO charge, the defense lawyers argue, then the entire case must be thrown out because it is not one involving violations of federal law. The defendants’ motion neither admits nor denies the basic ILS allegations.

In its court filings, submitted starting Oct. 12, ILS says Bonner conspired with Dwyer to set up a shell company called Pegasus Global International, a one-employee company that has no relation to Pegasus Global Holdings, a technology development firm with offices in London, Washington and Reston.

Bonner, in his position as ILS chief technical officer, steered ILS contract work to Pegasus Global International for a five-year period ending in August.

Pegasus Global International in turn contracted with a company called Rocket Sled Motors for much of the safety certification work. ILS says Dwyer is the only employee of Pegasus Global International, and Bonner the only employee of Rocket Sled.

Over the five-year period, ILS says, Pegasus Global International performed at least 137 system safety analyses for ILS, billing more than 16,000 hours of work at rates that ILS has blacked out in its court filing.

Through Rocket Sled, Bonner received between 60 percent and 80 percent of the payments from ILS during this period.

It was only when Bonner made errors in recording the transactions that ILS became aware of the fraud and confronted Bonner in August, the ILS documents say. ILS says Bonner confessed to what he had been doing with Pegasus Global International and was fired Aug. 15.

As part of its preparations for commercial launches, most of satellites with U.S. parts, ILS receives detailed information from satellite manufacturers. That information cannot be sent directly to Khrunichev because any export of it must first pass U.S. International Traffic in Arms Regulations (ITAR) procedures.

ILS does not have authority to export such data to Russia, meaning the data must be cleansed of ITAR-controlled data before being forwarded to Khrunichev.

ILS says it has since become aware that it could perform this task in-house. But from 2007 to this past August, it relied on Bonner’s insistence that Pegasus Global International and no one else should do the work.

In a separate allegation that apparently is not associated with the ILS court filing, ILS alleges that Bonner, with a former ILS employee, tried to establish a company that would compete directly with ILS while he was a top manager at ILS.

Many of the details about this company, which was incorporated in 2009 in Delaware but otherwise is not named in the lawsuit, are unclear. But portions of the lawsuit that are not redacted suggest that Bonner was trying to create an ILS-type company that would market Chinese launch vehicles.

ILS says that ITAR restrictions are particularly strict with respect to China and that any association of an ILS executive with China could have caused trouble for ILS. ILS says it found no ITAR violations in Bonner’s dealings with the proposed new company.

Peter B. de Selding was the Paris Bureau Chief for SpaceNews.