Nozette Spy Case Resulted From Earlier NASA Fraud Investigation

Over at Newsweek, Michael Isikoff and Mark Hosenball have a doozy of an update on the espionage charges against Stewart David Nozette, a government contractor who is principal investigator for a key experiment on NASA’s Lunar Reconnaissance Orbiter and worked on India’s Chandrayaan-1 spacecraft and the DOD’s Clementine orbiter.

The investigation that led to his arrest on Monday resulted from an earlier investigation into Nozette’s dealings with NASA. The inquiry involved alleged fraud involving a non-profit that he and his wife led, and counter charges that NASA was retaliating against him for exposing a convicted felon in the space agency’s upper management:

A U.S. government official (who asked not to be identified talking about a sensitive matter) said the investigation of Nozette grew out of an investigation of the scientist by NASA’s inspector-general for alleged fraud. According to documents filed in federal courts in Maryland and the District of Columbia, in January 2006, NASA’s IG opened a probe into whether the Alliance for Competitive Technology (ACT), a nonprofit corporation of which Nozette was the president and his wife, Wendy McColough, was a director, “may have submitted false claims to NASA.”

According to a public affidavit sworn by Anthony Pavlik, a special agent for the NASA IG, the preliminary investigation “disclosed that ACT submitted potential false claims to NASA when it invoiced NASA for reimbursement for the salary and an additional 40 percent for fringe benefits it allegedly incurred on Nozette’s behalf as an ACT employee, when according to ACT’s federal income tax return, these expenses were not fully paid.”

Nozette through his lawyers denied the fraud charges and in another court filing, seeking to have a court quash a subpoena the NASA IG issued for ACT bank records, claimed that the NASA IG investigation of Nozette was “clearly part of an ongoing, groundless and retributive effort by NASA to discredit, harass and malign Dr. Nozette and ACT.” The lawyer claimed that NASA was retaliating against Nozette because the scientist allegedly had “exposed the presence of a convicted felon … among NASA’s upper echelons,” which became a serious embarrassment to the space agency. NASA did not respond to Nozette’s claims that he was being victimized for being a whistle-blower, and a federal judge rejected Nozette’s attempts to quash a subpoena for his bank records.

No charges were filed in the NASA investigation, but it led to a larger FBI inquiry into the scientist’s activities.

The story also indicates that when Nozette was approached by an FBI agent posing as a member of the Israeli security agency Mossad, he thought he was already working for them because of a decade-long consulting gig with Israel Aerospace Industries, the nation’s largest defense contractor. He allegedly said, “I mean that’s what I always thought, [the foreign company] was just a front.”

Read the full story.