Two NASA Rockets Worth $700 Million Went Up in Flames Because Metal Supplier Faked Quality Test Results for Over 20 Years, Investigation Finds (excerpt)
(Source: Mail Online; posted May 03, 2019)
By Ian Randall
At Vandenberg Air Force Base in California, Orbital Sciences workers monitor NASA's Glory upper stack as a crane lifts it from a stationary rail for attachment to the Taurus XL rocket's Stage 0. (NASA photo)
The destruction of two NASA rockets has finally been explained, as investigations reveal they had been built with faulty aluminium provided by a fraudulent supplier.
Sapa Profiles Inc, a manufacturer based in Oregon, committed the crime over a period of more than 20 years.
The parent company, Norsk Hydro, has been ordered to pay £35 million ($46 million) in damages and lab supervisor Dennis Balius has been sentenced to three years in prison.
A combined total exceeding several billions of dollars was lost from 450 customers as a result of the firm passing off unsafe, poor quality metal as suitable for construction purposes.
Some of the defective materials ended up in two NASA rockets that had been launched to carry climate-analysing satellites into orbit.
When protective shields failed to detach from the rockets, they were left too heavy to reach orbit and ultimately broke up as they fell back down to earth. (end of excerpt)
Click here for the full story, on the Mail Online website.
NASA Investigation Uncovers Cause of Two Science Mission Launch Failures
(Source: NASA; issued April 30, 2019)
NASA Launch Services Program (LSP) investigators have determined the technical root cause for the Taurus XL launch failures of NASA’s Orbiting Carbon Observatory (OCO) and Glory missions in 2009 and 2011, respectively: faulty materials provided by aluminum manufacturer, Sapa Profiles, Inc. (SPI).
LSP’s technical investigation led to the involvement of NASA’s Office of the Inspector General and the U.S. Department of Justice (DOJ). DOJ’s efforts, recently made public, resulted in the resolution of criminal charges and alleged civil claims against SPI, and its agreement to pay $46 million to the U.S. government and other commercial customers. This relates to a 19-year scheme that included falsifying thousands of certifications for aluminum extrusions to hundreds of customers.
NASA’s updated public summary of the launch failures, which was published Tuesday, comes after a multiyear technical investigation by LSP and updates the previous public summaries on the Taurus XL launch failures for the OCO and Glory missions. Those public summaries concluded that the launch vehicle fairing — a clamshell structure that encapsulates the satellite as it travels through the atmosphere — failed to separate on command, but no technical root cause had been identified. From NASA’s investigation, it is now known that SPI altered test results and provided false certifications to Orbital Sciences Corporation, the manufacturer of the Taurus XL, regarding the aluminum extrusions used in the payload fairing rail frangible joint. A frangible joint is a structural separation system that is initiated using ordnance.
“NASA relies on the integrity of our industry throughout the supply chain. While we do perform our own testing, NASA is not able to retest every single component. That is why we require and pay for certain components to be tested and certified by the supplier,” said Jim Norman, NASA’s director for Launch Services at NASA Headquarters in Washington. “When testing results are altered and certifications are provided falsely, missions fail. In our case, the Taurus XLs that failed for the OCO and Glory missions resulted in the loss of more than $700 million, and years of people’s scientific work. It is critical that we are able to trust our industry to produce, test and certify materials in accordance with the standards we require. In this case, our trust was severely violated.”
To protect the government supply chain, NASA suspended SPI from government contracting and proposed SPI for government-wide debarment. The exclusion from government contracting has been in effect since Sept. 30, 2015. NASA also has proposed debarment for Hydro Extrusion Portland, Inc.,formerly known as SPI,and the company currently is excluded from contracting throughout the federal government.
“Due in large part to the hard work and dedication of many highly motivated people in the NASA Launch Services program, we are able to close out the cause of two extremely disappointing launch vehicle failures and protect the government aerospace supply chain,” said Amanda Mitskevich, LSP program manager at NASA’s Kennedy Space Center in, Florida. “It has taken a long time to get here, involving years of investigation and testing, but as of today, it has been worth every minute, and I am extremely pleased with the entire team’s efforts.”
According to a press release issued by the Department of Justice, SPI disputes NASA’s positions, and except for those facts admitted to in the DPA [deferred prosecution agreement] and the plea agreement, the claims resolved by the civil settlement are allegations only. There has been no determination of liability.
Manufacturer Agrees to Pay Over $46 Million for Defrauding Customers in Connection with Test Result Falsification Scheme
(Source: US Department of Justice; issued April 23, 2019)
An Oregon aluminum extrusion manufacturer has agreed to pay $46 million to NASA, the Department of Defense, and others to resolve criminal charges and civil claims relating to a 19-year fraud scheme that included falsifying thousands of certifications for aluminum extrusions provided to hundreds of customers.
Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, Assistant Attorney General Jody Hunt of the Justice Department’s Civil Division, U.S. Attorney G. Zachary Terwilliger for the Eastern District of Virginia, Inspector General Paul K. Martin of the NASA Office of Inspector General, Special Agent in Charge Loren ‘Renn’ Cannon of the FBI’s Portland Field Office and Special Agent in Charge Bryan Denny of the Defense Criminal Investigative Service’s (DCIS) Western Field Office made the announcement.
According to court documents, Hydro Extrusion Portland, Inc., formerly known as Sapa Profiles Inc. (SPI), and its corporate parent, Hydro Extrusion USA, LLC, formerly known as Sapa Extrusions Inc. (SEI), admitted to providing customers, including U.S. government contractors, with falsified certifications after altering the results of tensile tests designed to ensure the consistency and reliability of aluminum extruded at the companies’ Oregon-based facilities. Tensile testing involves slowly stretching and then ripping apart a sample of the metal using a machine, which then measures the force applied to the sample at each stage of the test.
“For nearly 20 years, Sapa Profiles and Sapa Extrusions falsified critical tests on the aluminum they sold — tests that their customers, including the U.S. government, depended on to ensure the reliability of the aluminum they purchased,” said Assistant Attorney General Benczkowski of the Department of Justice’s Criminal Division. “Corporate and personal greed perpetuated this fraud against the government and other private customers, and this resolution holds these companies accountable for the harm caused by their scheme.”
“Today’s settlement reflects the Civil Division’s commitment to pursue fraudulent conduct,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division. “The Department will vigorously pursue those who seek to take advantage of American taxpayers and undermine the safety and integrity of critical government programs.”
“For nearly two decades, SPI and its employees covered up substandard manufacturing processes by brazenly falsifying test results,” said U.S. Attorney G. Zachary Terwilliger for the Eastern District of Virginia. “They then provided the false test results to hundreds of customers across the country, all to increase corporate profits and obtain production-based bonuses. This proposed resolution ensures that the victims of this conduct, including the U.S. military, can replace faulty product put into the supply chain and help recover the costs foisted on taxpayers to investigate this scheme. I want to thank our partners at NASA-OIG, DCIS, and the FBI for their efforts in helping bring much-needed oversight and reform to these companies.”
“The results of this investigation are indicative of the law enforcement community’s unwavering commitment to protecting the aerospace supply chain,” said NASA Inspector General Paul K. Martin. “I am very proud of the central role the NASA OIG played in unraveling the test falsification scheme.”
“Our partners at NASA and in the military – as well as hundreds of private businesses – put their faith in the integrity of this supplier and the structural integrity of its products,” said Special Agent in Charge Loren ‘Renn’ Cannon of the FBI’s Portland Field Office. “For almost two decades, this company’s greed violated that trust. Today’s proposed resolution is an important step to repairing the harm done.”
“Today’s proposed resolution with SPI exhibits the unending commitment of DCIS and its investigative partners to bring to justice those who seek to defraud the Department of Defense,” said Special Agent in Charge Bryan Denny of the DCIS Western Field Office. “Those who purposely disregard requirements imposed to assure the quality of materials provided to our military will be investigated and prosecuted to the fullest extent of the law.”
According to court documents, SPI has agreed to plead guilty to one count of mail fraud, and SEI has entered into a deferred prosecution agreement (DPA) in connection with a criminal information filed today charging the company with mail fraud. As part of the plea agreement, SPI has agreed to pay $34.1 million in combined restitution to NASA, the Department of Defense’s Missile Defense Agency (MDA), and commercial customers. SPI has also agreed to forfeit $1.8 million in ill-gotten gains. The plea agreement remains subject to acceptance by the court at a plea hearing currently scheduled for May 13, 2019, before U.S. District Judge Liam O’Grady. The DPA with SEI is conditioned on the court’s acceptance and SPI’s satisfaction of the plea agreement’s terms.
SPI also agreed to pay $34.6 million as part of a related civil settlement to resolve its liability under the False Claims Act for causing a government contractor to invoice MDA and NASA for aluminum extrusions that did not comply with contract specifications. Government contractors purchased aluminum extrusions for use on rockets for NASA and missiles provided to the MDA. Under the terms of the civil settlement agreement, SPI will satisfy the $34.6 million settlement through credits totaling $23.6 million for its restitution payments as part of the criminal plea agreement, plus additional payments of $6 million to NASA and $5 million to the MDA.
According to the companies’ admissions, employees at SPI facilities in the Portland area generally altered the tests in one of two ways.
First, from in or about 1996 through in or about 2006, an SPI plant manager led a scheme to make thousands of handwritten alterations to failing test results by changing failing numbers that fell below the minimum required test results to appear to be passing. Those numbers were then typed onto a certification and provided to customers.
Second, from in or about 2002 through September 2015, Dennis Balius, the SPI testing lab supervisor, led a scheme to alter tests within SPI’s computerized systems and provide false certifications with the altered results to customers. Balius also instructed employees to violate other testing standards, such as increasing the speed of the testing machines or cutting samples in a manner that did not meet the required specifications. Balius pleaded guilty in July 2017 and was sentenced to three years in prison and ordered to pay over $170,000 in restitution.
According to court documents, the SPI employees generally engaged in these practices to conceal the inconsistent quality of aluminum extrusions produced by SPI, avoid the costly scrapping of metal and accompanying production delays, improve SPI’s and SEI’s profits, and receive bonuses that were calculated in part based on a production metric.
In addition, the companies admitted that SPI’s customers included U.S. government contractors who in turn provided aluminum extrusions produced by SPI to NASA and the MDA for use in “frangible joints” in rockets provided to NASA and missiles provided to the MDA, respectively. According to court documents, the replacement cost of frangible joints provided to the MDA that included SPI extrusions is approximately $15.3 million, and NASA incurred approximately $9 million in investigative and other costs to determine the impact of SPI extrusions on NASA operations.
As described in the civil settlement agreement, NASA maintains that SPI’s manufacturing processes lacked sufficient controls and produced extrusions unable to pass mechanical properties testing. 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 disputes NASA’s positions, and except for those facts admitted to in the DPA and the plea agreement, the claims resolved by the civil settlement are allegations only. There has been no determination of liability. To protect the government supply chain, NASA both suspended SPI from government contracting and proposed SPI for debarment government-wide. The exclusion from government contracting has been effective since Sept. 30, 2015.
A number of significant factors contributed to the Department’s criminal resolution with the companies. Among these, the companies received significant credit for their cooperation with the Department’s investigation and their engagement in extensive remedial measures to address the misconduct, including the termination and severance of employees who were involved, the implementation of state-of-the-art equipment to automate the tensile testing process, company-wide audits at all U.S. tensile labs, increased resources devoted to compliance and revamping internal quality controls and quality audit processes. However, the companies did not receive more significant mitigation credit, either in the penalty or the form of resolution, because the companies did not voluntarily self-disclose the full extent of their misconduct to the Department.
This case was investigated by NASA Office of Inspector General, FBI’s Portland Field Office, and DCIS. The NASA Launch Services Program and Office of the General Counsel Acquisition Integrity Program provided extensive cooperation and assistance throughout the investigation.
Trial Attorneys Emily Scruggs and Laura Connelly of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Ryan S. Faulconer are prosecuting the criminal case, with previous assistance from former Trial Attorneys Thomas Hall and Jennifer Ballantyne. Trial Attorneys Allison Cendali and Greg Pearson of the Civil Division’s Fraud Section handled the civil case.