Spaceport audit report alleges impropriety

A report released by state Auditor Brian Colón alleges “a severe breakdown of internal controls that resulted in possible waste and abuse of taxpayer funds” at Spaceport America, according to the auditor’s Government Accountability Office.

The report, the result of a June 12 whistleblower complaint, details allegations of improper procurement, excessive travel spending and a lack of financial oversight going back several years at the 18,000-acre Spaceport America, which is governed by the Spaceport Authority.

The state placed former Spaceport Director Daniel Hicks on administrative leave after the formal whistleblower complaint was filed by Zach De Gregorio, who was the chief procurement officer of the spaceport at the time. Five days later, the state hired The McHard Accounting firm to conduct an independent audit.

The report alleges that during the investigation, issues in addition to those in the original complaint were found, some involving De Gregorio himself, as well as the concerns of other individuals who came forward.

Most of the allegations surround Hicks’ behavior during his tenure as spaceport director. Witnesses and documents allege, “Mr. Hicks was an extremely dysfunctional manager, at times a forceful bully, and at other times obviously attempting charm in what was described to us as ineffectual, inept and also embarrassing to observers.”

The report goes on to allege Hicks “was seemingly unable to hear or absorb negative news or review, and would hold his beliefs in the face of overwhelming evidence to the contrary.”

Hicks reportedly spent hundreds of thousands of taxpayer dollars on travel, that were essentially lobbying services and advertising trying to attract orbital space flight business, a technology that does not yet exist for inland spaceport use. He traveled so much that he spent as much as half his time away from the state on business he claimed was spaceport-related, so much that Spaceport board chair at the time, Richard Holdridge, complained Hicks was “trying to manage the spaceport by phone.”

The report alleges Hicks’ “refusal to follow appropriate internal control procedures and bullying employees to find ‘waivers’ resulted in a cascade of failures, work arounds and cover-ups throughout the administration of the spaceport. It was only through diligent work of individual staff members that the spaceport remained functional for its primary purpose: commercial spaceflight.”

In July 2019, Hicks allegedly tried to give himself a raise without board approval, from $153,000 to $175,000. Both De Gregorio and Holdridge are alleged to have helped him in this attempt.

According to the report, Hicks referred to the spaceport’s budget as “his money” to spend as he pleased, and he resented “interference by Santa Fe.” Financial mismanagement allegations include creating a document allowing the director to “personally and solely” approve all contracts and purchases up to $60,000; changing the budget and approving contracts without board votes; awarding multiple consulting contracts; and selecting vendors without going through the proper processes.

De Gregorio told spaceport staff his job was to get Hicks what he wanted regardless of whether spending was prudent or in line with spaceport goals or even consistent with the law and legislative intent.

The report alleges “as finance director, it was Mr. De Gregorio’s responsibility to say ‘no’ to Mr. Hicks and ensure that the spaceport operated within its budget, in a fiscally sound manner. Instead [De Gregorio] collaborated … to circumvent rules to procure contracts, spend money on unapproved travel, file materially false travel vouchers, … and generally fail to control the spaceport’s finances in any responsible way.”

De Gregorio resigned June 21 after filing the whistleblower complaint June 12.

Scott McLaughlin has been serving as the interim head of Spaceport America since late June. McLaughlin is an aerospace engineer who also serves as operations director. He has continued to recruit business at the Spaceport, create jobs and oversee test launches, maintenance and site development.

McLaughlin will continue to lead spaceport team until a permanent director is hired.

“It is critical that management at all levels of government support ethical behavior. Setting an honorable tone at the top by establishing and following internal controls is essential,” Colón said. “People in positions of power more easily have the opportunity to misuse and abuse their authority. It is crucial we hold people in power accountable. The tone at the top must be transparent and committed to honesty, integrity, and accountability.”

The full investigative report can be seen at lascrucesbulletin.com.