WASHINGTON — A pension fund has filed suit against the board of directors of Amazon, claiming they “acted in bad faith” in approving launch contracts for the Project Kuiper broadband constellation that awarded billions of dollars to Blue Origin, the corporate founded by Amazon’s Jeff Bezos.
The suit, a public version of which was filed with Delaware’s Court of Chancery Aug. 28, alleges that Amazon’s board and certainly one of its committees spent “barely an hour” reviewing contacts with Blue Origin and United Launch Alliance, whose Vulcan Centaur rocket uses engines from Blue Origin, before approving them in March 2022. Delaware Business Court Insider first reported the lawsuit.
The suit is filed by the Cleveland Bakers and Teamsters Pension Fund, an Amazon shareholder, and sheds recent light on how Amazon chosen Blue Origin and ULA, together with Arianespace, for contracts announced in April 2022 to launch the three,236-satellite constellation. It also suggests that private animus between Bezos and Elon Musk, founding father of SpaceX, prevented Amazon from considering SpaceX for those contracts.
Amazon board’s review of Kuiper contracts
Based on the suit, Amazon management informed the board’s audit committee in July 2020 it was considering Arianespace, Blue Origin, ULA and a fourth company whose name is redacted in the general public version of the criticism for launch contracts. The committee, the suit stated, “didn’t take steps to oversee the negotiation process or to insulate the method from conflicts of interest.” [emphasis in original] Bezos, on the time, was chief executive of Amazon and stays its largest shareholder, while also owning Blue Origin.
The complete board was briefed in November 2020 on plans for Project Kuiper, including its consideration of Blue Origin and ULA, amongst others, for launch contracts, which the suit said didn’t end in the board taking any motion about potential conflicts of interest: “no guidelines, no oversight, and no expressions of concern.”
While the identity of the fourth potential launch provider is just not made public within the suit, it does state that Amazon’s board was informed SpaceX was not into consideration. That included not only the general launch contracts but a smaller interim contract that Amazon announced in April 2021 for nine Atlas 5 launches from ULA. While the worth of the Atlas launch contract is redacted within the suit, it argues that SpaceX’s list price for Falcon 9 launches was significantly less.
By January 2022, Amazon management provided the board’s audit committee with summaries of the contracts it planned to sign with Blue Origin and ULA for Kuiper launches. The suit argues that the committee spent “not more than just a few minutes” discussing the contracts, based on the length of the meeting and variety of items on the agenda, before approving them and forwarding them to the complete board of directors.
The complete board met in March 2022 to contemplate all three launch contracts. The suit claims the board received no expert review of the contracts or other information, including whether the ultimate price was fair to Amazon and whether other launch providers were considered, beyond a 2.5-page summary of the proposed contracts. The board approved the contracts in a gathering lasting 40 minutes.
The suit argues that the contracts are unfair to Amazon, partly because SpaceX was not even considered: “Despite being the launch provider with probably the most proven track record and the bottom prices within the industry, SpaceX was seemingly not considered by Amazon,” the criticism states. “By excluding SpaceX, Bezos and his management team minimized bid competition for the launch agreements and certain committed Amazon to spending a whole lot of hundreds of thousands of dollars greater than it will have otherwise needed to.”
Bezos, the suit concludes, was in a position to negotiate from each side given his roles at Amazon and Blue Origin. “For a yr and a half, Bezos was free to discover and negotiate with launch providers for Amazon, while also free to barter against Amazon on behalf of Blue Origin.”
Musk-Bezos rivalry
The suit strongly suggests that SpaceX was excluded from consideration from the Project Kuiper competition due to rivalry between Bezos and Musk. A piece of the 77-page criticism is dedicated to outlining the history of the competition between the 2 billionaires and between SpaceX and Blue Origin, which included Blue Origin’s protest of a NASA lunar lander contract won by SpaceX in 2021. That section features screenshots of tweets from Musk appearing to taunt Bezos and Blue Origin.
“Given their bitter track record, Bezos had every reason to exclude Musk’s SpaceX from the method entirely,” the suit states. “And Bezos, it should be assumed, couldn’t swallow his pride to hunt his bitter rival’s help to launch Amazon’s satellites.”
Second-largest Amazon contract
The general public version of criticism redacts many details in regards to the launch contracts, including specific dollar values. It does state, though, that the combined contracts were “the second-largest capital expenditure in Amazon’s 25+ yr history” after its $13.7 billion acquisition of grocer Whole Foods. Amazon’s second largest acquisition, of studio MGM in 2021, was valued at $8.5 billion.
While the suit redacts the contract values, it does state that almost 45% of their overall value goes to Blue Origin, either through the direct contract between Amazon and Blue Origin or ULA’s purchase of BE-4 engines from Blue Origin to satisfy its own Amazon launch contract. Amazon has spent about $1.7 billion on those three launch contracts to this point, including $585 million on to Blue Origin.
Not one of the three firms have performed any launches under those contracts to this point. The primary launch of ULA’s Vulcan Centaur has slipped to no sooner than the fourth quarter of this yr, while the primary flights of Arianespace’s Ariane 6 and Blue Origin’s Latest Glenn have been delayed to 2024. Not one of the three firms have said when those vehicles would start launching Kuiper satellites.
Amazon announced Aug. 7 it will use certainly one of the nine Atlas 5 launches it procured in 2021 to launch a pair of demonstration satellites as soon as late September. Those satellites were originally slated to launch on an RS1 rocket from ABL Space Systems, then moved to the inaugural Vulcan Centaur launch that it will have shared with Astrobotic’s Peregrine lunar lander.
Amazon is facing a schedule crunch to launch its Kuiper satellites. Its Federal Communications Commission license requires the corporate to have half the constellation, or greater than 1,600 satellites, in orbit by July 2026, and the complete constellation in orbit by July 2029.
An Amazon spokesperson didn’t answer specific questions on the suit in an announcement to SpaceNews Aug. 31: “The claims on this lawsuit are completely without merit, and we sit up for showing that through the legal process.”
The suit seeks unspecified damages and legal fees in addition to “immediate disgorgement” of profits, advantages and other compensation the defendants received because of this of the contracts.