Court Throws Out Case Against Former ILS Exec

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PARIS — A U.S. district court has thrown out a lawsuit filed by commercial launch services provider International Launch Services (ILS) against its former chief technical officer “for failure to state a claim,” according to the court’s records.

The dismissal of the case against former ILS Chief Technical Officer James M. Bonner and a friend, Thomas J. Dwyer, came Jan. 11, just 12 weeks after Reston, Va.-based ILS filed charges alleging that Bonner and Dwyer set up a shell company and billed ILS for work that Bonner was actually doing himself.

Industry officials reviewing the case when it was filed said they were surprised by the fact that ILS’s lawyers — Kathryn Bridge Codd and Jason Levine of Vinson & Elkins LLP of Washington — had sought to portray Bonner and Dwyer’s actions as violations under the Racketeer Influenced and Corrupt Organizations (RICO) Act, a federal law used mainly in cases of organized crime.

ILS officials said Feb. 8 that they are evaluating their position and will decide in the coming weeks whether to refile the case with the same RICO allegations or to take it to state court to prosecute a case for fraud. They said the case was thrown out “without prejudice,” meaning the company is free to refile the lawsuit if it chooses to do so.

ILS, which is majority-owned by Moscow-based Khrunichev Space Center, the prime contractor for Russia’s Proton heavy-lift rocket, alleged that Bonner and Dwyer bilked ILS by setting up a shell company and steering ILS contract work to it over a five-year period ending in August 2012.

Specifically, ILS alleged that Bonner himself — and not the company ILS thought was doing the work — performed at least 137 system safety analyses for ILS, billing more than 16,000 hours of work at rates that ILS declined to disclose to the court.

ILS has since determined, following Bonner’s dismissal from the company in August, that it could perform the safety-analysis work on its own without outside help.

Bonner and Dwyer’s legal team from Dimuro Ginsberg PC of Alexandria, Va., and Edward B. McMahon Jr. of Middleburg, Va., had argued to the U.S. District Court for the Eastern District of Virginia that the RICO allegations were over the top in a case where the ILS charge was a “garden variety” violation of fiduciary duty.

This line of reasoning appears to have won the court’s favor.