PARIS — Commercial satellite launch provider( ) has turned to a Virginia state court to sue the company’s former chief technical officer and an accomplice for what it says is a five-year conspiracy to commit fraud.
Reston, Va.-based ILS, which commercializes Russia’s heavy-lift Proton rocket, says in a filing with Fairfax County Circuit Court that James M. Bonner, who was fired in August as ILS’s chief technical officer, and an accomplice, Thomas J. Dwyer, bilked ILS for $1.8 million between May 2007 and July 2012.
ILS filed similar allegations in October in a federal district court, alleging that Bonner and Dwyer committed violations of the federal Racketeer Influenced and Corrupt Organizations (RICO) Act, which is normally used to prosecute organized crime.
The district court dismissed the charges without prejudice, meaning ILS could have refiled allegations in the same federal court.
Instead, ILS has elected to sue Bonner and Dwyer for civil conspiracy to commit fraud by setting up shell companies that purported to perform safety data analyses of launches for ILS during the five-year period.
ILS says that it was Bonner himself who did the work, and that he and Dwyer pocketed the ILS payments for 137 safety data packages submitted during the five years in question.
The new lawsuit suggests that Bonner’s activities may have gone beyond what Bonner’s lawyers, in rejecting the RICO claims, had labeled “garden variety” breaches of fiduciary duty.
In its Feb. 12 filing with the circuit court, ILS says the U.S. Federal Bureau of Investigation searched Bonner’s ILS offices in September, after Bonner had been fired, and seized materials there. The filing does not purport to explain the FBI’s involvement.
ILS further says that in addition to bilking the company by setting up a fictitious contractor, Bonner was at work creating a direct ILS competitor that would perform sales and marketing for a Chinese rocket to compete for global commercial launch business.
This separate U.S.-based company, called Azure Space, which Bonner allegedly created with a former ILS employee, received nontechnical but proprietary ILS data from Bonner, ILS says in its lawsuit.
U.S.-built satellites and most U.S.-built satellite components have been barred from being launched from Chinese territory for longer than a decade. It is unclear how Bonner and Azure Space intended to overcome this prohibition, which is enforced in part by the U.S. International Traffic in Arms Regulations (ITAR) governing U.S. technology exports.
ILS says in its lawsuit that it performed an investigation of the data Bonner allegedly forwarded to Azure Space, and that the inquiry “did not reveal any ITAR violations involving ILS.”
As recounted by ILS, Bonner appears to have been clumsy in setting up nonexistent companies to collect ILS payments.
The lawsuit lists instances in which Bonner submitted bills that were identical to previous invoices and would not have stood up to close attention. The problem was that Bonner alone was reviewing them and approving payment.
Bonner endorsed Dwyer for a job at ILS in 2012 without informing ILS of Dwyer’s involvement in the safety package contract. Dwyer did not get the job.
Once the alleged fraud began to be disclosed to ILS by unnamed third parties, the company says it began to review the work Bonner performed but passed off as the work of an outside contractor and found obvious inconsistencies. Invoices relating to one launch in some cases looked like they were mere copies of previous invoices for other launches.
In one case, ILS says Bonner got sloppy on the technical side, inserting incorrect satellite battery and fuel-tank safety margin information with respect to a launch. ILS says it was forced to spend 50 to 60 hours of employee time to review the launch’s safety data package to be sure there were no other errors.
ILS is alleging, among other things, that Bonner and Dwyer committed fraud, breach of contract, and conspiracy to commit fraud, and that in addition to this Bonner committed breach of fiduciary duty.
The company is asking that the $1.8 million it paid Bonner and Dwyer be reimbursed, that ILS be awarded punitive damages of $350,000, and that a jury trial award the company triple damages in the amount of $5.4 million.