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Report Recommends Former Spaceport America Executives be Investigated for Possible Criminal Charges

By Doug Messier
Parabolic Arc
December 2, 2020
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Sunset at the “Virgin Galactic Gateway to Space” terminal hangar facility at Spaceport America. (Credit: Bill Gutman/Spaceport America)
  • Outside investigation concluded former Executive Director Dan Hicks ignored spending regulations, submitted falsified travel documents, and wasted hundreds of thousands of dollars on unnecessary travel and unrealistic projects
  • Hicks portrayed by staff as an incompetent manager who bullied employees
  • Ex-CFO Zach DeGregorio facilitated Hicks’ violations by improperly approving travel and ignoring rules and statutes
  • Former New Mexico Spaceport Authority Board Chairman Rick Holdridge accused of allowing violations to continue

by Douglas Messier
Managing Editor

A highly critical investigation of Spaceport America has determined the New Mexico state government should consider formal criminal and/or administrative charges against former Executive Director Dan Hicks and former Chief Financial Officer (CFO) Zach DeGregorio for their mishandling of the spaceport’s finances.

“As detailed above, there is evidence to conclude that Dan Hicks violated criminal and administrative statutes, as well as the State of New Mexico Governmental Compliance Act, and Governor Lujan Grisham’s Code of Conduct, during his tenure as Director of the Spaceport,” the report said.

Daniel Hicks

Investigators from the McHard Firm reached a similar conclusion about DeGregorio, who is accused of improperly approving Hicks’ travel, backdating documents and ignoring procurement and other regulations.

Officials at the New Mexico Economic Development Department (EDD) have referred the matter to the state Attorney General, the document said.

State officials ordered the outside investigation after DeGregorio filed a complaint against Hicks alleging irregularities in June. DeGregorio left his job shortly afterward. Hicks was placed on administrative leave in June, and fired in October following the receipt of the investigation report.

Spaceport Authority employees told investigators that Hicks repeatedly referred to the taxpayer-funded New Mexico Spaceport Authority as “my agency” and the budget as “my money.”

The review found that Hicks routinely ignored statutes and regulations as he awarded contracts, hired friends for key positions, and traveled around the nation to conferences, meetings and other events. Specifically, the report claims that Hicks:

  • spent more than $60,000 on travel after he was named to run the spaceport in November 2016;
  • failed to get travel authorization from the governor’s office for 33 separate trips that cost $32,404;
  • overspent on hotels, airfares and other travel expenses;
  • submitted falsified and backdated travel documentation;
  • falsely claimed that Vice President Mike Pence appointed him to the National Space Council and/or the National Space Council Users Advisory Group to justify traveling to those meetings;
  • spent $3,100 traveling around the country for a week to attend events marking 50th anniversary of the Apollo 11 moon landing without any apparent benefit to the spaceport;
  • spent hundreds of thousands of dollars on travel and other expenses attempting to attract orbital launch services even though the spaceport could not host them for safety reasons;
  • worked with DeGregorio to give himself a substantial raise that had never been approved by the Spaceport Authority’s Board of Directors;
  • considered the Board of Directors a “nuisance” to which he had no obligation to provide contracts or requests for proposals for review;
  • hired friends without going through the required competitive process; and,
  • inappropriately accessed the DeGregorio’s email after the complaint was filed.

The investigation found that DeGregorio “intentionally tried to ‘distance the agency’ from the controls implemented by the New Mexico State Legislature that were intended to ensure fair and impartial procurement, and the provision of best value to the taxpayers….

“Mr. DeGregorio ‘approved’ contracts, travel, and other expenditures that he did not have the authority to approve,” the review found. “Mr. DeGregorio also took deliberate steps to obscure expenditures for travel and other unapproved spending, and to deceive those making approvals, including back-dating documents, and providing other false information on travel vouchers…

“Additionally, Mr. DeGregorio had the signature stamp of Spaceport America Board Chair, Richard Holdridge, and used it at times without apparent approval or authority by Mr. Holdridge,” the document added.

DeGregorio is accused of having outsourced much of his own job to a contractor, Fiore, at a cost of hundreds of thousands of dollars over several years. The amount spent was “at many times the cost to the taxpayers of Mr. DeGregorio simply doing his own job by himself.”

DeGregorio allowed Fiore to use him as a reference when it bid for the contractor. He then failed to remove himself from the selection committee that ultimately awarded Fiore the contract.

Bullying & Dysfunction

Investigators said that in addition to violating state statutes and spending rules, Hicks was terrible at his job. The problems at the spaceport became so bad that anchor tenant Virgin Galactic lodged complaints with state officials in Santa Fe.

“Overall, the witnesses describe and the documents reveal that 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. This is consistent with how Mr. Hicks presented himself in his interview with us,” the document said.

Senior staff told investigators they were locked out of key meetings. Hicks also held town meetings to get staff input into decisions he had already made.

“During our interviews, one manager said ‘being in a meeting with Dan [JHicks] is like watching your dog chase soap bubbles.’ Other staff members related similar descriptions of Mr. Hick’s management style; several felt sorry for him, because he was such an unskilled and incompetent manager,” the report said.

Hicks was described by employees as being impervious to arguments that didn’t comport to his views.

“According to virtually all of the witnesses we interviewed, Mr. Hicks was seemingly unable to hear or absorb negative news or reviews, and would hold his beliefs in the face of overwhelming evidence to the contrary. One of his upper managers stated that Mr. Hicks was ‘pathologically devoid of any memory of anything that was inconsistent with his views’, such that he was only capable of acknowledging whatever agreed with his views,” the document said.

“As an example, according to witness, Mr. Hicks attended a meeting in Santa Fe in March 2020, in which he was chastised for inappropriate behavior and given an ultimatum, yet he returned to Las Cruces and reported to his management team that everything was fabulous and Santa Fe was 100% behind him,” the report added.

Hicks also allegedly told Alicia Keyes, New Mexico secretary of Economic Development, that the spaceport had a strategic plan when no such document actually existed. Hicks then stalled when asked to provide the document.

Spaceport America has suffered financially due to more than a decade of delays by Virgin Galactic in beginning commercial suborbital flights from the southern New Mexico facility. Millions of additional tax dollars have expended for operations, maintenance and expansion due to the lack of revenues from flights.

Investigators said Hicks costly attempts to attract orbital space flight companies and military programs to Spaceport America were neither practical nor aligned with the commercial purpose of the facility.

“Mr. Hicks spent hundreds of thousands of taxpayer dollars on travel, consulting services that were essentially lobbying (using unregistered lobbyists) and advertising, trying attract ‘orbital space flight’ business to the Spaceport,” the report stated. “However, the technology does not yet exist for an inland spaceport to launch orbital flights; Spaceport experts we interviewed stated that the technology for such orbital flight may exist 10-20 years in the future.”

Spaceport America does not have approvals from the Federal Aviation Administration (FAA) for orbital launches. The FAA only permits orbital flights over water for safety reasons.

“Per our interviews, Mr. Hicks didn’t seem to grasp the fact that the Spaceport wasn’t currently ready, nor did the technology yet exist, to launch orbital flights from the Spaceport,” the document said. “This is demonstrated by the fact that Mr. Hicks reported in an email that he was excited to meet the Lt. Governor of Colorado, because she would be key to determining where in Colorado the Spaceport would be allowed to drop booster rockets during takeoff. Per our interviews with Spaceport experts, this is patently absurd, but Mr. Hicks nevertheless seems to have actually believed it.”

Hicks also sought military space projects, which would have put the Spaceport America in direct competition with his former employer, the neighboring White Sands Missile Range. The effort added to the increasingly dysfunctional atmosphere at the agency.

“Internal management was dysfunctional as well, with factions who support Mr. Hicks’ visions of orbital and military Spaceport, and others who wanted to see the Spaceport follow its original vision as a commercial spaceflight facility,” the report said.

Weak Oversight

Holdridge, who was replaced as chairman of the Board of Directors by Keyes earlier this year, was found to have failed to provide adequate oversight of operations.

“Former Board Chair Mr. Holdridge stated that Dan Hicks traveled much of the time, and was ‘trying to run the Spaceport over the phone’. Mr. Holdridge didn’t provide any corrective supervision regarding this, however, and allowed it to continue. He stated that he considered himself to be a ‘hands-off Chair’, and really left the work to Executive Director Hicks and the agency,” the report said.

Holdridge, DeGregorio and Hicks were involved in an unsuccessful effort to raise Hicks’ salary from $153,000 to $175,000 in 2019. DeGregorio wrote a superior saying the Board of Directors had requested the pay hike. However, investigators could find no evidence the board formally considered or voted on the issue in their review of meeting agendas and minutes.

“Several months later, on October 18, 2019, in another attempt to give Mr. Hicks the raise, Mr. DeGregorio conferred with Board Chair Richard Holdridge, with Mr. Hicks agreement, and they decided to give the raise solely on Mr. Holdridge’s authority as Chair,” the report said. “Both Mr. Hicks and Mr. DeGregorio misrepresented the facts surrounding the requested raise, stating the raise was approved by the Board, which was untrue.”

Investigators said the board might have considered the pay hike during an informal meeting, which would be a violation of New Mexico’s Open Meetings Act if a quorum had been present. The law requires public access to board meetings, with notices, agendas and related material published in advance.

Investigators say they found several violations of the Open Meetings Act. Holdridge and Hicks shared responsibility to ensure operations were within the law, the report said. DeGregorio was responsible for putting together the board’s meeting agendas.

The review found that Hicks would sometimes brief all the board members over the phone without any advanced notice or access given to the public. The board would reach decisions during these briefings.

During three separate years, Holdridge was found to have appointed himself and other board members to the Audit Committee without any discussion or vote by the board.

The investigation also found that minutes of some of the board meetings were incomplete. In other cases, board agendas failed to list planned closed sessions where the board would discuss issues exempt from the Open Meetings Act.