BUFFALO — A Penn Yan man accused of forgery involving space parts was arrested Wednesday by federal authorities.

James Smalley, 41, was charged by criminal complaint with falsifying inspection reports for space parts. His arrest was announced by James Kennedy Jr., U.S. Attorney for the Western District of New York.

The charge carries a maximum penalty of 10 years in prison and a fine of $250,000.

“According to the criminal complaint, James Smalley took the act of forgery to a new level,” said FBI Buffalo Special Agent-in-Charge Gary Loeffert. “A potentially catastrophic level with the potential to not only cost millions of dollars, but also jeopardize years of irreplicable work.”

Assistant U.S. Attorney Richard Resnick, who is handling the case, said Smalley was a quality assurance engineer at PMI Industries, a Rochester aerospace precision machining service specializing in high-tolerance machining for flight critical aerospace parts used to build space flight vehicles by SpaceX and other Department of Defense aerospace contractors.

Smalley began his employment at PMI in March 2017, working on contracts for SpaceX, which developed the Falcon launch vehicle family and the Dragon spacecraft family. Falcon and Dragon both deliver payloads into Earth orbit for NASA, the Air Force, other U.S. government agencies and private industry.

SQA Services is a subcontractor to SpaceX and provides multiple quality assurance functions in the aerospace and defense manufacturing industries.

The complaint states that in January 2018, an internal audit by SQA — at the direction of SpaceX — revealed multiple falsified source inspection reports and non-destructive testing (NDT) certifications from PMI Industries for Falcon 9 and Falcon Heavy flight critical parts.

SpaceX notified PMI of the anomalies. Source inspections and NDT are key tools used in the aerospace industry to ensure manufactured parts comply with quality and safety standards.

Specifically, the signed source inspection report had a forged signature of the SQA inspector. SpaceX and SQA officials believe the signature of the inspector was photocopied and cut and pasted onto the source inspection report with a computer.

In February 2018, the NASA Launch Services Program alerted the NASA Office of Inspector General and Kennedy Space Center Resident Agency regarding the falsified source inspection reports and false NDT certifications created by PMI.

Some of the false source inspection reports and NDT certifications were related to space launch vehicle components that — at the time of discovery — were to be used for the Transiting Exoplanet Survey Satellite mission, which launched from a SpaceX Falcon 9 rocket in April 2018.

The investigation has identified that Smalley, while a PMI employee, falsified at least 38 source inspection reports for space vehicle parts procured by SpaceX for the Falcon 9 and Falcon Heavy series of space vehicles.

The investigation also has identified at least 76 individual piece parts that were rejected during source inspection or were never inspected by SQA, then subsequently shipped to SpaceX.

A records request from SpaceX identified seven NASA space flight missions, two U.S. Air Force space flight missions, and one National Oceanic and Atmospheric Administration space flight mission that were affected by parts purchased by SpaceX from PMI.

SpaceX terminated its business relationship with PMI, which subsequently closed its operation.

Smalley is due for an initial appearance in federal court in Buffalo on Thursday.

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